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ABC Group decides to go the public market to raise the needed capital for its business expansion. In the stock market, the Company will issue
ABC Group decides to go the public market to raise the needed capital for its business expansion. In the stock market, the Company will issue 1 million stocks at par value of 10,000 VND. ABC has just paid a 20% dividend this year (percentage of par value). The Company's expected long-term growth rate is 5%. Companies with similar risk have required return on equity of 8%. In the bond market, ABC will issue multiple maturities bonds, all selling at the face value of $1000 as follow: 1-year bond 6% coupon 2-year bond 7% coupon 5-year bond 7.5% coupon a. Calculate the value of ABC stock using Gordon Growth model. If ABC is going to IPO the stock at the price of 50,000 VND. Would you invest in the stock? Please explain your answer (5 marks) b. Calculate the YTM of all ABC's bonds above. (3 marks) c. Based on the expectation theory, calculate the expected 1-year interest rate next year. (2 marks) Your
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