Question: 1: RON Ltd has the following capital structure components: Five million shares issued with a current market price of 11. Equity holders require a 14%

1: RON Ltd has the following capital structure components:

Five million shares issued with a current market price of 11. Equity holders require a 14% return.
$10 million face value of Corporate bonds outstanding. These bonds pay an annual coupon of 6% and currently trade at a yield to maturity of 6%.

If the firm faces a corporate tax rate of 30%, compute RON Ltd's Weighted Average Cost of Capital (WACC). Enter your answer indecimalform to FOUR decimal places. For example 10.34%, would be entered as 0.1034

2: Assume that the economy has three types of people.20% are fad followers, 70% are passive investors, and 10% are informed traders.The portfolio consisting of all informed traders has a beta of 1.2 and an alpha of 3.38%.The market has an expected return of 9% and the risk-free rate is3%.

What is the alpha for the fad followers?Enter your answer as a percentage to two decimal places (i.e. 0.12% rather than 0.0012; the percent sign is not necessary).

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