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Problem 6-10 Portfolio Required Return Suppose you manage a $4.37 million fund that consists of four stocks with th following
mework Problem 11-06 New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its productio
b.What are the net operating cash flows in Years 1, 2, and 3? Do not roun intermediate calculations. Round your answers to th
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Answer #1

Ans 1) 8.52%

Stock INVESTMENT (i) Beta (ii) Investment* Beta (i)* (ii)
A              2,40,000                     1.50                         3,60,000.00
B              7,00,000                   (0.50)                       (3,50,000.00)
C              9,80,000                     1.25                       12,25,000.00
D            24,50,000                     0.75                       18,37,500.00
Total            43,70,000                       30,72,500.00
AVERAGE BETA = (INVESTMENT * BETA) / TOTAL INVESTMENT
3072500 / 4370000
0.703089245
Required Return = Risk free Return + (Market Return - Risk free return)* Beta
Required Return = 5% + (10% - 5%)*0.703089245
Required Return = 8.52%
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