Howard wants to start his own hotel company.He wants to finance the company using debt, preferred stocks, and common stocks.He has decided to set up his capital structure with 35% debt, 20% preferred stocks, and 45% common stocks.Market statistics: the risk-free rate is 3% and the market rate is 12%.

1.Suppose a bond pays $120 at the end of each year forever. If 12% is the relevant interest rate, what is the value of this investment to you today?

Bond Price=

2.Howard wants to sell preferred stocks on the NYSE.His expected dividend is $4.00, and the required rate of return on the stock is 8%.At what price should Howard sell his preferred stock?

Preferred stock price =

3.Howard also wants to issue common stocks with a beta of 1.7.His projected dividend is $4.32, and the growth rate of his company is projected at 14%.At what price should he sell his stocks?

R_s (required rate of return) =

Common stock price =