1) You are considering the portfolio of two stocks: X and Y. Stock X have the expected return of= 12% and a beta if 1.2. Stock Y has beta of 0.7, and Treasury Bills are yielding 3%. If all stocks are fairly priced, and you desire your portfolio to have beta equal to market, determine the expected return of your portfolio?
2) You just finished capital investment analysis on a= $100 million project that has 5-year life. You supposed a $30 million salvage value, $10 million above its adjusted tax basis, a 12% WACC, and a 35% marginal tax rate. Unluckily, resulting NPV is negative $2.0 million. How much should you rise your $30 million salvage value assumption to make NPV = 0?