Problem #1: Suppose the risk free rate (rfr) = 5%, average market return (rm) = 10%, and the required or expected rate of return E(r) = 12% for the TNG Co.

1. Calculate the Beta () for TNG.
2. If TNG's Beta () = 2.0, what would be TNG's new required or expected rate of return (r)?

Problem #2: Given the following information on the LK Co., and using the equation V = CF / (r - g), calculate: (a) Cash flow per share (b) total value of the LK Co. and (c) mix of capital financing.

• Info: V per share = $71; r = 0.10; g = 0.03; 11 million shares outstanding; Long-term debt = $281,000,000

Problem #3: WACC and Beta () Hint: Use the WACC formula to determine cost of equity

• What is XYZ's Company's given the following?
• XYZ's WACC is 11%, XYZ's Capital Structure is 60% Debt and 40% Equity, Total Cost of Debt is 10%, Tax Rate is 20%. RFR = 3%, MRP (market risk premium) = 6%.