# Portfolio Theory and Asset Pricing Models, Business & Finance Homework Help

1. Define the following terms, using graphs or equations to illustrate your answers whereverfeasible:a) Portfolio; feasible set; efficient portfolio; efficient frontierb) Indifference curve; optimal portfolio c) Capital Asset Pricing Model (CAPM); Capital Market Line (CML) d) Characteristic line; beta coefficient,e) Arbitrage Pricing Theory (APT) (Brigham, & Ehrhardt, 2014)2. An analyst has modeled the stock of Crisp Trucking using a two-factor APT model. The risk-free rate is 6%, the expected return on the first factor (r1) is 12%, and the expected return on the second factor (r2) is 8%. If bi1 = 0.7 and bi2 = 0.9, what is Crisp’s required return?3. Excel Speadsheet: a. Using the financial statements shown below for Lan & Chen Technologies, calculatenet operating working capital, total net operating capital, net operating profitafter taxes, free cash flow, and return on invested capital for 2010. (Hint: Startwith the partial model in the file and report all dollar figures in thousands to reduceclutter.)b. Assume there were 15 million shares outstanding at the end of 2010, the year-endclosing stock price was \$65 per share, and the after-tax cost of capital was 8%.Calculate EVA and MVA for 2010.Lan & Chen Technologies: Income Statements for Year Ending December 31(Thousands of Dollars)2010 2009Sales \$945,000 \$900,000Expenses excluding depreciation and amortization 812,700 774,000EBITDA \$132,300 \$126,000Depreciation and amortization 33,100 31,500EBIT \$ 99,200 \$ 94,500Interest expense 10,470 8,600EBT \$ 88,730 \$ 85,900Taxes (40%) 35,492 34,360Net income \$ 53,238 \$ 51,540Common dividends \$ 43,300 \$ 41,230Addition to retained earnings \$ 9,938 \$ 10,3102010 2009AssetsCash and cash equivalents \$ 47,250 \$ 45,000Short-term investments 3,800 3,600Accounts receivable 283,500 270,000Inventories 141,750 135,000Total current assets \$476,300 \$453,600Net fixed assets 330,750 315,000Total assets \$807,050 \$768,600Liabilities and equityAccounts payable \$ 94,500 \$ 90,000Accruals 47,250 45,000Notes payable 26,262 9,000Total current liabilities \$168,012 \$144,000Long-term debt 94,500 90,000Total liabilities \$262,512 \$234,000Common stock 444,600 444,600Retained earnings 99,938 90,000Total common equity \$544,538 \$534,600Total liabilities and equity \$807,050 \$768,600

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