5. You are given with the following information statements of a public firm Bambie in the airline industry concurrently. (Notice that all negative numbers are parenthesized). The firm has issued 12 million shares of common stock with current market price as $45/per share, the expected dividend is $4.90/per share with 2.5% growth rate, 300,000 shares of preferred stocks with promised preferred dividend and preferred stock price as $2.20/per share and $32.5/per share, respectively. The firm also has currently, 2 million 4.6%-coupon bonds with $1,000 face value that pays the coupons semi-annually. The current bond price is $820/per bond. The bonds are expected to mature at 2020. Answer the following questions:

a) If using the market prices for assessment on rates of return, what is the rate of return the common stock of Bambie? What is the rate of return for their preferred stocks?

b) What is the bonds yield to maturity of the firms corporate bond?

c) Suppose you are also given with the following financial statements of Bambie for the past three years. What are the historical returns on equity for this company for the past three years? Is the firm Bambie doing well from the perspectives of shareholders? Why or why not?

d) Is this firm well-diversified with their arrangement of capital? That is, are they well diversified with different sources of capital?

e) Based on the given information, provide your ratios analyses. Apply the Du-Pont model and interpret your results for the firms performance.

Balance Sheet (in millions)

2012 2013 2014

Assets

Cash 30 10 473

Marketable securities 100 100 0

Accounts Receivable 920 150 800

Inventory 710 178 450

Plant, Building, and Equipments (net) 1872 2802 1209

Investments in affiliates 0 30 329

Total Assets 3632 3270 3261

Liabilities

Short-term debts 507 9 30

Advances from customers 111 34 134

Accounts payable 685 192 771

Interest payable 75 98 62

Tax payable 127 147 128

Other Accrued Expenses 20 15 35

Bonds payable 925 1486 750

Stockholders' Equity

Common stock 1021 1055 1175

Additional paid-in capital 74 156 47

Retained earning 87 78 129

Total liabilities and equities 3632 3270 3261

Income Statement(in millions)

2012 2013 2014

Net Sales 3296 3418 3983

Cost of Goods Sold 2115 1979 2510

Selling and General Expenses 700 812 759

Depreciation Expense 160 298 284

Interest Expense 90 109 121

Income Tax Expense 195 137 254

Net Income 36 83 55