At the divisions target capital structure what is the

This preview shows page 6 - 9 out of 9 pages.

8.At the division’s target capital structure, what is the cost of equity for the Consumer Electronics (CEG) division? (20 points)
7 9.At its target capital structure, what is the WACC for the firm as a whole? (20 points)
8 SECTION IV: IS IT WORTH THE RISK TO HAVE HIM RETURN?Questions 10-12 (30 points total) 10.What was the historical return on Nike stock for the month of August (to the nearest basis point)? (5 points)11.Assume that the ONLY risky assets available to DCP were the four portfolios in Exhibit 4.2 (Dudesox, Fund A, Fund B, or the Fund C) and that there was NO WAY to further combine those portfolios together. For example, it is NOT possible to put some of your money in Fund A and some in Fund B (see footnote 2). You can ONLY select one of the risky assets. However, you can assume that DCP didn’t have to put all its money in a risky fund, but was able to put some of its money in the risk-free asset. For example, it could place 50% of its money in Fund A and 50% in the risk-free asset. Given those limitations, would you recommend that DCP keep Appel as the manager of the Fund? BRIEFLY, WHY? Provide quantitative support for your recommendation.(15 points)
9 12.If DCP were able to diversify their RISKY assets by creating an equally weighted portfolio of their Dudesox fund with ONLY ONEof the other 3 risky portfolios (Fund A, Fund B, or Fund C), which of the three funds would you recommend and BRIEFLY, WHY? (note: DCP will plan to allocate some of its money to this new RISKY portfolio of 2 assets and still be able to put its remaining money in the risk-free asset). (10 points)

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture