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Calculate the expected return on the portfolio

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Reference no: EM132828445

Problem 1: Whitby Inc. (WI) and Oshawa Inc. (OI) are both service companies. Their stock returns for the past three years were as follows: WI: -5%, 15%, 20%,; OI: 8%, 8%, 20%. If WI and OI are combined into portfolio with 50% of the funds invested in each stock, calculate the expected return on the portfolio.

A. 12%

B. 10%

C. 13%

D. 9%

E. 11%

Problem 2: North York permanently borrows $50M at an interest rate of 10%, what is the present value of the interest tax shield? Assume a 21% marginal corporate tax rate.

A. $50M

B. $1.5M

C. $10.5M

D. $5M

E. $25M

Reference no: EM132828445

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