Computing expected return on equity with capital structure

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Q1) Backwards Resources has WACC of 12.0%, and it is subject to 38% marginal tax rate. Backwards has $364 million of debt outstanding at the interest rate of 11% and $674 million of equity (market value) outstanding. Compute expected return on equity with this capital structure?

Q2) Describe how you would carry out the scenario and sensitivity analysis of project. What would be some project-specific risks and market risks related to this project?

Q3) You have $ 250,000 to invest in the stock portfolio. Your options are Stock H, with the expected return of 14%, and Stock L, with the expected return of 10.1%. If your goal is to make a portfolio with the expected return of 12%, how much money will you invest in?

Stock H?
Stock L?

Reference no: EM1310667

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