Elbur Co. pays 40% in corporate taxes and is financed entirely by common stock with a 1,000 shares outstanding trading at $100 per share. Elbur's return on assets is equal to 20%. Elbur has only assets-in-place and, thus, does not grow. The risk-free debt yields 5% and the market return is equal to 12.5%. Let EPS stand for earnings per share, E for equity, and D for debt.

(1) Calculate:

(i) In this environment, what ecient portfolio (describe the porfolio's weights) returns 8%?

(ii) If the volatility of such ecient portfolio is equal to 10%, what is Elbur's market risk?

(iii) Elbur's (P/EPS) ratio;

(iv)  Elbur's EPS:

Answer rating: 100% (QA)

Calculation i In this environment what ecient portfolio describe the porfolios weights returns 8 Por... View the full answer