Question: 5.1 Explain the difference between realized return and expected return with illustrations. In finance why are we concerned more with expected return. [ Marks 5]

5.1 Explain the difference between realized return and expected return with illustrations. In finance why are we concerned more with expected return.

[ Marks 5]

5. 2 Using the components of Return on Equity can you explain why increasing debt will increase ROE?

[Marks 5]

5.3 The debt to equity ratio for a company is 0.4. The Risk free rate in the market is 7.32% and the beta for the company is 1.28. The market premium is 12.6%. The tax rate for the company is 30%. The Cost of Debt is 8% for the company. If the Debt ratio changes to .6 what will be the WACC for the company.

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