Ho Kin Electronics (HKE) is a cell phone battery manufacturer. Yesterday, October 22, 2018, HKE paid its annual dividend of $1.3 per share. The market in general believes that HKE financial prospects is particularly bright as it just developed a new cell battery technology that will enable the cell phone usage lasting 500% longer than any other cell phone batteries currently available on the market. Dividends for next three years of the compay are expected to increase by 20 percent per year. After that, investors believe that HKE will increase its dividend at a modest annual rate of 4 percent. Investors require an 18 percent annual return on HKE stock, and HKE always pays its dividend on October 22 each year.

To finance the new cell battery production, HKE raise funding by issuing a three-year annual coupon bond, with 5% coupon rate, selling at par.

Suppose today is October 23, 2018 with the following information obtained from the market:

	Return	Beta	Standard Deviation
Hang Seng Index (HSI)	10%	-	-
Common stocks of HSBC	-	1.1	25%
Risk-free Rate	5%	-	-

e.Determine the stock value of HKE stock on 23 Oct 2018.

f. Determine the stock value of HKE stock on 23 Oct 2019.

g.For an investor who purchased HKE stock on 23 Oct 2018, received a dividend on 22 Oct 2019, and sold the stock on 23 Oct 2019, what was the total rate of return on the investment? Determine how much of this came from the dividend, and how much came from the capital gain? [Answer in %]

i.Suppose you would like to form a portfolio by investing $40,000 on HKEs stock and $50,000 on HSBCs stock. Compute your portfolios expected return. [Answer in %]

j.Suppose HKE likes to fund the production of the new cell battery by employing 40% of equity and 60% of debt, given its tax rate of 40%, calculate HKEs cost of capital (i.e. WACC).[Answer in %]

k.If the project of new cell battery can yield a return of 8 percent, solely based on financial consideration, should HKE undertake this project? Briefly explain your answer. (Limit to within 60 words)