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please do it correctly will upvote Show ALL calculations and your working to answer. You SHOULD keep the numbers up to 4 decimal points. (Total
please do it correctly will upvote
Show ALL calculations and your working to answer. You SHOULD keep the numbers up to 4 decimal points. (Total 20 marks) Question 1. Required: a. FIN 921 Ltd is a fast growing stock and expects to grow at an annual rate of 30% for the next five years. It then will settle down a constant-growth rate of 5%. The first dividend will be paid out in Year 4, and will be equal to $2. The required rate of return is 15%. What is the current price of the stock? (8 marks) b. Assume that Domino's Pizza Enterprise is a constantly growing company with a 5% growth rate. Today the Domino's shares are selling for $39.90. If the required return on equity is 10%, how much Domino paid for the last year dividend? (2 marks) C. ABC Education Ltd has a corporate bond outstanding with a 8% coupon, semi-annual interest, 15 years to maturity and a face value of $1,000. Similar bonds currently yield 5%. By prior agreement, the company will skip the coupon payments during the period between 4 and 5 (4 payments, the payments at time 4 through to 5.5) as well as during the period between 11 and 13 (6 payments; the payment at time 11 through to 13.5). In total 10 coupons will be skipped and these payments will be repaid, without interest, at maturity. What is the company bond's value? Please draw the timeline. The correct timeline will be marked as well. (10 marks)Step by Step Solution
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