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5. (5 points) CEO of Biotech Ltd is entitled to receive cash bonus if company delivers positive net ROA. The firm has 10,000,000 shares outstanding
5. (5 points) CEO of Biotech Ltd is entitled to receive cash bonus if company delivers positive net ROA. The firm has 10,000,000 shares outstanding with market price of $29 per share. Its projected dividend one year from now is $1.74. Afterwards, the dividends are expected to grow at 4% rate. The firm also has 50,000 bonds traded with market price of $950. The bonds carry 5% coupon rate paid on annual basis, have face value of $1000, and mature in 10 years. Corporate tax rate is 35%. What should be the minimum ROA CEO needs to deliver in order to be entitled for cash bonus? Explain and show your calculations
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