Can someone please help me answer number 2. Showing all calculations 1. Using the historical records for each stock you have been able to make the estimates contained in the table which follows. Each stock is publically traded on the Toronto Stock Exchange. State of Economy Probability of Economic State STOCK A STOCK B STOCK C BOOM 0.20 0.25 0.35 0.60 NORMAL 0.55 0.15 0.15 0.10 BUST 0.25 0.00 -0.10 -0.45 One of the firms clients has a portfolio which has invested 40% in each of Stock A and Stock B and 20% in Stock C. Please do the following: (a) Using the above information calculate the expected return for the portfolio. (b) Calculate the portfolios variance and standard deviation. (c) What does the standard deviation of the portfolio measure? (d) If the expected rate of return on Treasury Bills is 3.00%, then what is the expected risk premium on this portfolio? (e) What is the beta of this portfolio, if the market portfolio has an expected return of 8%? (f) Does this portfolio have more systematic risk than the market portfolio? 2. Another of the firms clients has shares in a company called Quicksilver Inc. Quicksilver Inc. has an EBIT of $100,000 per year that is expected to continue forever. It can borrow at a rate of 5%, but currently has no debt. Under its current capital structure it has 100,000 issued and outstanding shares. It is considering a plan under which it would borrow $500,000 and use all of these funds to repurchase half of its issued and outstanding shares (the proposed capital structure). Ignoring the impact of taxes, use M&Ms proposition 1 and 2 to answer the following questions with respect to the current and proposed capital structures: (a) What is the price per share of equity? (b) What is the value of the company? (c) What is the cost of equity? (d) What is the weighted average cost of capital? Assuming a corporate tax rate of 20%, and that any change in the value of the company happens only after the share repurchase has been completed, please use M&Ms proposition 1 and 2 to answer the following questions with respect to the current and proposed capital structures: (e) What is the value of the firm? (f) What is the cost of equity? (g) What is the weighted average cost of capital?