Firm to achieve targeted weighted average cost of capital

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Reference no: EM131339734

1. You own a portfolio comprised entirely of 100 shares of Stock A and 500 shares of Stock B. The current market prices for Stock A and Stock B are $20 and $7, respectively. Stock A’s expected return is 14%, and Stock B’s expected return is 9%. What is the expected return on the portfolio?

a. 0.1006

b. 0.1050

c. 0.1082

d. 0.1113

e. 0.1141

2. Phil's Carvings, Inc. wants to have a weighted average cost of capital of 9.5 percent. The firm has an aftertax cost of debt of 6.5 percent and a cost of equity of 12.75 percent. What debt-equity ratio is needed for the firm to achieve their targeted weighted average cost of capital?

a. .67

b. .84

c. .92

d. .76

e. 1.08

Reference no: EM131339734

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