the following information about Bio Wow Ethanol: common stockholders\" billion;
ID: 2803687 • Letter: T
Question
the following information about Bio Wow Ethanol: common stockholders" billion; price/earnings ratio 3.5; common shares outstanding 50 million; 50. You are giver and price/book ratio share of BioWow stock. book ratio = 2.0. BioWow is in the 40% tax bracket. Calculate the price ofa 51. You invest $5,000 in security A with a beta of 0.8 and $7,000 in security B with a beta of 1.3. What is the beta of the portfolio you constructed? 52, A portfolio has a beta of 1.4. The portfolio is made up of securities X and Y. 40% of the portfolio is in X and 60% in Y. The beta of security Y is 0.9. What is the beta of security X? 53. Sean Spawn purchased a share of Gamma Airlines with an initial price of $52 per share. Gamma paid a S2 dividend at the end of the year and had a year end share price of $64. What rate of return did Sean earn on his investment?Explanation / Answer
50) Book Value per share (BVPS) = Total Equity / No. of shares = 4,000 / 50 = $80 per share
Share Price = BVPS x P / B = 80 x 2 = $160.0
51) Beta of portfolio = Weighted average beta of stocks = W(A) x Beta(A) + W(B) x Beta(B)
= 5000 / (5000 + 7000) x 0.8 + 7000 / (5000 + 7000) x 1.3
= 1.09
52) Portfolio Beta = w(X) x Beta(X) + w(Y) x Beta(Y)
=> 1.4 = 40% x beta(X) + 60% x 0.9
=> beta(X) = 2.15
53) Rate of return = (End Price + Dividend) / Purchase Price - 1 = (64 + 2) / 52 - 1 = 26.9%
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