Please answer as soon as possible.

Subject : Cooparate Finance

Question 4 Alon plc has the following financial information. It possesses a payout ratio of 0.7,ROE of 30%, equity beta of 1.43 and is expected to pay a dividend in the following year amounting to 3.00/ share. There are 2 million equity outstanding and it has fair valuation. It also possesses a face value debt of 30 million issued at 20% and has 5 years expiry. YTMs on similar debt is 8%. Rf is 7% and the market return is 14.5%. Assume there are no taxes and transaction costs. Required: (a) Calculate Alon's required rate of return and its equity cost of capital. (12 marks) (b) The firm decides to redeem half of its debt at today's prices. Calculate the firm's required rate of return and cost of equity. Explain your results. (7 marks) (c) The firm decides to enter a completely different business area and decides to analyse betas of companies currently involve in the new business area. Below is some information : What cost of capital should the firm utilise for the new business ? (6 marks) [Total : 25 Marks]