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Each of the six firms in the table below is expected to pay the listed dividend payment every year in perpetuity. Firm Dividend ($ million)

Each of the six firms in the table below is expected to pay the listed dividend payment every year in perpetuity.

Firm

Dividend ($ million)

Cost of Capital (%/year)

S1

9.8

8.4

S2

9.8

12.9

S3

9.8

14.8

B1

98.0

8.4

B2

98.0

12.9

B3

98.0

14.8

Using the cost of capital in the table: Firm S1 market value is $__________ million. (Round to one decimal place.) Firm S2 market value is $__________ million. (Round to one decimal place.)

Firm S3 market value is $__________ million. (Round to one decimal place.)

Firm B1 market value is $__________ million. (Round to one decimal place.)

Firm B2 market value is $__________ million. (Round to one decimal place.)

Firm B3 market value is $__________ million. (Round to one decimal place.)

Rank the three S firms by their market values. For a self-financing portfolio that went long on the firm with the largest market value and shorted the firm with the lowest market value, the expected return of a self-financing portfolio is __________%. (Round to one decimal place.) Repeat with the B firms. The expected return of a self-financing portfolio is __________%. (Round to one decimal place.)

Rank all six firms by their market values. For a self-financing portfolio that went long on the firm with the largest market value and shorted the firm with the lowest market value, the expected return of a self-financing portfolio is __________%. (Round to one decimal place.)

Repeat part (c) but rank the firms by the dividend yield instead of the market value. The expected return of a self-financing portfolio is __________%. (Round to one decimal place.)

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