Hi I need help with a couple questions I cant figure out You own a $210,000 port
ID: 2637055 • Letter: H
Question
Hi I need help with a couple questions I cant figure out
You own a $210,000 portfolio that is invested in stock L and stock M. The portfolio beta is equal to the market beta. Stock L has an expected return of 18.7 percent and has a beta of 1.42. Stock M has a beta of 0.88. What is the value of your investment in stock L?
A. $38,600
B. $42,333
C. $44,500
D. $46,667
E. $47,200
What is the net present value of a project that has an initial cost of $40,000 and produces cash inflows of $8,000 per year for 11 years if the discount rate is 15 percent?
A. $798.48
B. $1,240.23
C. $1,869.69
D. $2,111.41
E. $2,470.01
What is the internal rate of return (IRR) of the following set of cash flows?
Year
Cash Flow
0
Year
Cash Flow
0
Explanation / Answer
2. the present value of project which costs initial $40,000 is as follows:
project life= 11 years,
yearly income= $8,000
discount rate= 15%
NPV = ($8,000 X 5.234) - $40,000
= $41,872 - $40,000
= $1872
3. IRR=project cost annual cash inflows
= 2630012066= 2.197
at 3 years 2.197 is available at 17% and 18%
the IRR will be in between 17 and 18%
4. investment = $$25,000
expected return is 16%
income= $32,100 for two years
the return= 7100/25000= 20.4% for two years
the project can be accept.
it has to sell 3200 bonds