(a) Calculate the value of each investment based on your required rate of return. Which investment would you select? Why

(b) Assume CNEs managers expect an earnings downturn and resulting decrease in growth of 3%. How does this affect your above answer?

(c) What required rates of return would make you indifferent to all three options?

- CNE ordinary shares are selling for $25. The shares recently paid a SL is dividend and the firm's earning per share have increased from $1.50 to $3 in the past five years. The firm expects to grow at the same rate for the foreseeable future, Your required rates of return for these investments are 5% for the bond, 5.5% for the preference shares and 10% for the ordinary shares. Using the information, answer the following questions, Required: (a) Calculate the value of each investment based on your required rate of return. Which investment would you select? Why (b) Assume CNE's managers expect an earnings downturn and resulting decrease in growth of 3%. How does this affect your above answer (c) What required rates of return would make you indifferent to all three options? - CNE ordinary shares are selling for $25. The shares recently paid a SL is dividend and the firm's earning per share have increased from $1.50 to $3 in the past five years. The firm expects to grow at the same rate for the foreseeable future, Your required rates of return for these investments are 5% for the bond, 5.5% for the preference shares and 10% for the ordinary shares. Using the information, answer the following questions, Required: (a) Calculate the value of each investment based on your required rate of return. Which investment would you select? Why (b) Assume CNE's managers expect an earnings downturn and resulting decrease in growth of 3%. How does this affect your above answer (c) What required rates of return would make you indifferent to all three options