can you help with the 3 quiz questions below.they are short Stock A has a beta o

Question

can you help with the 3 quiz questions below.they are short

Stock A has a beta of 1.7 and has the same rewardto- risk ratio as stock B. Stock B has a beta of .8 and
an expected return of 12 percent. What is the expected return on stock A if the risk-free rate is 4.5 percent?
Select one:
a. 20.44 percent
b. 16.67 percent
c. 14.46 percent
d. 18.97 percent
e. 12.89 percent

And next question

T.L. C. Enterprises just revised its capital structure from a debt-equity ratio of 0.30
to a debt-equity ratio of 0.45. The firm's shareholders who prefer the old capital
structure should:
Select one:
a. borrow funds and purchase more shares.
b. sell some shares and hold the sale proceeds in cash.
c. do nothing.
d. sell all of their shares and loan out the entire sale proceeds.
e. sell some shares and loan out the sale proceeds.

And

Which one of the following supports the theory that the value of a firm increases as
the firm's level of debt increases?
Select one:
a. M&M Proposition II, without taxes
b. No theory suggests this.
c. M&M Proposition I, with taxes
d. Static theory of capital structure
e. M&M Proposition I, without taxes

Explanation / Answer

1) stock B , EXpected return = Rf +Beta (Rm- Rf)

                     12 = 4.50 + .80(Rm - 4.50)

                 .80(RM-4.50 ) = 12 -4.50

               Rm - 4.50 = 7.50 /.80

                 Rm = 9.375 +4.50

               Rm = 13.875%

stock A , Expected return = 4.5 + 1.70 (13.875 -4.5)

                                      = 4.50 + 1.70* 9.375

                                     = 4.50 + 15.94

                                      = 20.44%

correct option is "A" -20.44%

b)correct option is "E" -sell some shares and loan out the sale proceeds

c)correct option is "C" - M& M proposition I , with taxes

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