What is the expected return when margin is 30

Assignment Help Finance Basics
Reference no: EM132499094

Investment Total = $1,250,000 Investment Allocation Company 1 = $975,000 Company 2 = $275,000

Company 1

Stock Price = $75; EPS = 3; ROE = 0.25; beta = 3; plowback = 0.8; R (f) = 0.04; R (m) = 0.1; MRP = 0.06; ROE Value = $243,750; Alpha = 3%; Expected Loss = 4875

Company 2

Stock Price = $155; EPS = 5; ROE = 0.10; beta = 1; plowback = 0.7; R (f) = 0.05; R (m) = 0.08; MRP = 0.03; ROE Value = $27,500; Alpha = 2%; Expected Loss = 916.67

Return on Investment without leverage = 21.70%

Question: For company 1 and 2, What is the expected return when margin is 30%, fee is 15%, and the rate on margin loan is 3% over R(f)?

Reference no: EM132499094

Questions Cloud

Explain connections between series and the societal issues : Explain the connections between series and the societal issues. Describe in detail a main character's conflict and their overall arc in the season.
Is cannally and kennedy acting in an ethical manner : Tonya Latirno is a staff accountant for Cannally and Kennedy, a local CPA firm. For the past 10 years, Is Cannally and Kennedy acting in an ethical manner
What is the net realizable value of receivables : During Year 2, Kincaid reported $211,000 of credit sales, wrote off $2,050 of receivables. What is the net realizable value of receivables
Describe the impact of organizational culture on performance : This assignment allows you to demonstrate mastery of course outcomes: analyze and describe the impact of organizational culture on performance.
What is the expected return when margin is 30 : For company 1 and 2, What is the expected return when margin is 30%, fee is 15%, and the rate on margin loan is 3% over R(f)?
How do resist : What version of sex/gender do you envision for the future? What can you do in your everyday communication to enact this world?
What amount of revenue will Spirit Company record : The prevailing rate of interest for this type of note at date of issuance was 7%. What amount of revenue will Spirit Company record on January
What factors would differential association theorists focus : Discuss What factors would differential association theorists focus on while explaining the differences between the lives of the two siblings? Why?
How much of Anwer rental loss can he deduct : During the year he has a net loss of $14,100. How much of Anwer's $14,100 rental loss can he deduct currently if he has no sources of passive income

Reviews

Write a Review

Finance Basics Questions & Answers

  What is the net income lew should show on his schedule

Transportation, 838 miles (at 57.5 cents per mile) 482, Entertainment 800, subscription to bonsai and Japanese gardening magazines 500, Gifts 8 @ $100 each, 2 @ 20 each $840, Rent and utilities for apartment , in total $10,000 ( 15 percent is used..

  Teakap inc has current assets of 1456312 and total assets

1.which of the following is considered a hybrid organizational form?2.which of the following is a principal within the

  How multiple-store retailer might set its annual performance

Why does a retailer need to use multiple performance measures to thoroughly evaluate its performance?

  What are the differences between the operating income capita

What are the differences between the operating income, capital gains income, and dividend income of a corporation: At approximately what rates are these different types of income taxed?

  What was the cost coverage ratio for the year

Sherwood Inc net income for the most recent year was $13,168. The tax rate was 34%. The firm paid $3,605 in total interest expense and deducted $2,382 in depreciation expense. What was the cost coverage ratio for the year?

  Student at the university of tennessee

While Mary Corens was a student at the University of Tennessee, she borrowed $16,000 in student loans at an annual interest rate

  Examining the logical approach to using cost of capital

In March 2010 Hertz Pain Relievers bought a massage machine that provided a return of 8 percent. It was financed by debt costing 7 percent.

  Involved in the different types of financial transactions

Discuss risks involved in the different types of financial transactions. You may focus your answer on any financial assets or transaction types.

  Investment of retained earnings

Assume GO's shares outstanding remains constant and all earnings growth comes from the investment of retained earnings.

  Describe one or more key dimension

Describe one or more key dimensions along which health care organizations vary with regard to budgeting.

  What is the firm after-tax cost of debt

How many bonds will the firm have to issue to receive the needed funds? What is the firm's after-tax cost of debt if the firm's tax rate is 32 percent?

  Open end mutual fund investing in us

Suppose you have decided to buy a diversified open-end mutual fund investing in U.S. common stocks. Because there are thousands of these funds available,

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd