Using the Capital Asset Pricing Model (CAPM), what is the expected return for each company? [ 5 points} 6. How does the correlation coefficient of the two stocks impact the standard deviation of your portfolio? Would a positive or negative correlation drive the risk of your portfolio up, and why? [15 points] Question 7 [20 points]: Use the companies you picked in the prior question to answer the three questions below. 1. Make a table that includes the trailing and forward P/E Ratios for each of your two companies. [4 points] 2. How do the companies' PE Ratios compare to those of several prominent market indices? [6 points] 3. What are some factors discussed in the lectures that can drive a firm's P/E ratio? Summarize the results of your P/ E table and provide a brief overview for what you think may be driving the differences between the two companies as well as between trailing and forward P/E ratio for a given company. [10 points] Note: Review the Price-to-Earnings ("P/E") page in the Course Resource Module which contains information on how to locate a company's PIE ratio on Yahoo!Finance as well as data on the P/E ratios for several market indexes (e.g., Dow Jones, S&P 500, etc.). Note: You must use companies that have positive earnings, otherwise P/E ratio is not meaningful (and often labeled as N/A or missing). If one or both of your companies has negative earnings, select different public firms with positive earnings. You cannot use Telsa for one of your companies. Question 8 [45 points]: Spear-It Inc, has the following nancing outstanding: . Debt: 300,000 bonds with a coupon rate of 4.0% and a current price of 120% of par. The bonds have 20 years to maturity and a par value of $1,000. The bond has semiannual compounding. . Eguity: 2.7 million shares of common stock with a current price of $130 per share and the beta of the stock is 1.19. . Market:The corporate tax rate is 21%, the expected market return is 9.5%, and the risk-free rate is 0.02%. Spear-It is considering purchasing Broke N Bored Grill, a privately held restaurant. Broke N Bored currently has debt outstanding with a market value of $15 million. The EBIT for Broke N Bored next year is projected to be $13 million. EBIT is expected to grow at 9% per year for the next five years before slowing to 2% in perpetuity. Change in Net Working Capital, Capital Spending, and Depreciation as a percentage of EBIT are