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Each of the six firms in the table,, is expected to pay the listed dividend payment every year in perpetuity. a. Using the cost of
Each of the six firms in the table,, is expected to pay the listed dividend payment every year in perpetuity. a. Using the cost of capital in the table, calculate the market value of each firm. b. Rank the three S firms by their market values and look at how their cost of capital is ordered. What would be the expected return 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? Repeat using the B firms. c. Rank all six firms by their market values. How does this ranking order the cost of capital? What would be the expected return 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? d. Repeat part (c) but rank the firms by the dividend yield instead of the market value. What can you conclude about the dividend yield ranking compared to the market value ranking? a. Using the cost of capital in the table, calculate the market value of each firm. Using the cost of capital in the table, the market value of Company S1 is $ million. (Round to two decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.)
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