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Calculate wacc and beta

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Problem 1: Calculate WACC and beta.

a.) A company has 700,000€ equity in the balance sheet and it has 300,000€ long-term debt from the bank. The cost of capital is 10% and owners' required rate of return is 5%. What is the company's weighted average cost of capital?

b.) You have two stocks in your investment portfolio, A and B. A consists 60% of your portfolio and B 40% of your portfolio. βA is 0,5 and βB is 1. The mean return on the market is 10% and the risk-free rate of return is 5%. Assume that the CAPM model applies. Calculate the mean return of your portfolio.

Reference no: EM132657753

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