1) AtlasPty Ltdneeds $50 million foritsnext growth phase.Itplans to raise the moneyby anInitial Public Offering (IPO) of shares andhasprovided the following information to the market.

The first dividend of $2.50 willbe paidnext year.

After that dividend, dividends are expected to grow annuallyby4% per annum,inperpetuity.

The underwriters will chargea 7per cent spread.

Assume shareholders requireareturn of16%per annum (effective annualrate).

a)Calculate the intrinsic value ofashareinAtlas.(3marks)

b) Ifthe offer price to the publicis$16.00 per share, calculate the number of shares that Atlas will need to issue to achieveitsgoal (of $50million, net of the underwriter'sfee).

2) Describe three waysinwhich investment banks assistin an IPO.

3) At1stJuly 2007, Bandit BankLtdmade1000ten yearloans,each promising annual repayments of $3,000 ataninterest rate of8%p.a.(effective). One yearlater,at1stJuly 2008, the bank received the scheduled repayments of $3,000 foralltheloans.The bank then on-sold theloanportfolio, ataprice basedonmarket interest rate of 9.4%p.a..Assumenoexpected defaults.

I- Calculate the total income return to Bandit Bankinthe year to1stJuly 2008(as apercentage to two decimal places).(2marks)

ii- Calculate the holding period return to Bandit BankLtdover the one year holding period(as apercentagetotwo decimalplaces).