1)You are given the following information regarding UFSK limited, a listed entity:

Number of outstanding shares: 100 000

Earnings: 300 000

Retention ratio: 60%

91-day Treasury bill rate: 6%

Market risk premium: 8%

UFSK Beta: 1.2

Dividend growth rate stable phase: 5%

Bonds outstanding: 5 000

Par value per bond: 1000

Semi-annual coupon rate on bonds: 6%

Bond yield to maturity: 8%

Bond years remaining to maturity: 4

Corporate tax rate: 30%

Additional information:

UFSK limited recently paid a dividend

UFSK recently signed a deal and expects a super normal growth in earnings. The company expects earnings to grow by 8% for the first two years then decline by 2% in the following year, there after a stable growth of 5% is expected into the future.

Required:

a)As an investment analyst advise your client how much must she expect to pay for UFSK limited stock.

b)Ascertain the market value of UFSK limited equity.

c)Determine the fair value of UFSK limited bond

d)Determine the total value of the company's debt

e)Determine the total value of UFSK limited

answers:

(a):

D(0) =

D(4)=

K( e) =

P(0) =

(b)=

( c)=

(d)=

( e)=