Assume that as an investor, you decide to invest 21% of your wealth in a risky asset that has an expected return of 11%, and a standard deviation of 24%. You invest the rest of your capital in A firm is considering the purchase of a machine which would represent an investment of $33 million, and would be depreciated in a straightline basis over 3 years. Sales are expected to be $14 million per year, and operating costs 49% of sales. The company is currently paying $3 million in interest per year, has a tax rate of 40%, and a WACC of 10%. What is the company’s free cash flow for year 1 of this project?
The risk-free rate, which offers a return of 2%. What is your portfolio's expected return?