. Assume a two-period world, perfect certainty, and perfect capital market. A firm has an initial endowment of $115 million. The firm has identified the following available investment opportunities: Period- O Period- 1 Proposal Outlay Return $19.31 $21.95 million million $30.94 $40.07 N million million $25.00 $28.45 Q million million R S $20.86 $24.13 million million $14.91 $16.01 million million These are not divisible projects, which cannot be invested in a fraction (the firm must invest 100 percent of each proposal or none of it). Assume that the average market rate of return is 13.80 percent. A. Which projects will the firm undertake to maximise the value of the firm? B. If the firm undertakes projects that will maximise the value of the firm, how much money will it invest in period 0 (now)? C. Does the firm need borrowing in period O? If yes, how much? Why? D. What period-0 dividend will be paid to shareholders (owners)? E. What will the period-1 (next) dividend be? F. What is the Present Value (PV) of period-1 returns from optimum investment in (ii)? G. What is the Net Present Value (NPV) from optimum investment in (ii)? H. How will the value of the firm change due to the decision of optimum investment in (ii)? I. How would your answers from (i) to (viii) above change if the firm had an initial endowment of $31 million only? QUESTION-3 (2 marks). A mortgage loan of $6.6 million will be paid in 25 years using equal monthly payments and the interest rate is 6.26 percent. What would be the monthly payment? After 6 years: the interest rate increases by 0.5 percent. What would be the new monthly payment? A corporate bond with a 30-year maturity was issued 6 years ago. The face value of this 8.84% quarterly coupon-paying bond is $2,000. Analysts find that this bond's current yield to maturity is 9.27 percent. Show your workings and find the value of this bond. Briefly explain what you have learned about the relationship between coupon rate and yield to maturity for a bond and its impact on bond value. Mention only the relevant points discussed in the recorded lecture. (Use a max of 200 words for the explanation). A company has issued 9 million ordinary shares. The company has just paid a dividend of $5.2 million. That dividend is expected to grow at 21 percent per annum for the next two years, afterward at 15 percent for three years, and then at a rate of 4.90 percent per annum to continue forever. Calculate the intrinsic value of the share assuming a required rate of return of 12.65 percent. Briefly explain what you have learned about the challenges of share valuation. How can you get rid of those challenges? Mention only the relevant points discussed in the recorded lecture. Explain using your own words (Max 200 words).