Question 1: Assume that the interest rate is 8%. How much would you need to set aside to provide each of the following? a 1 million at the end of each year in perpetuity. (4 marks) b. A perpetuity that pays 1 million at the end of the first year and grows at rate of 3% a year (4 marks) Consider the following three companies: company A, company B and company C. Assume that these companies have an opportunity cost of capital of 10%. C. Company A is expected to provide a dividend of 10 a share forever. What is the market price of company A? (4 marks) d. Company B is expected to pay a dividend of 5 next year. Thereafter, dividend growth is expected to be 4% a year forever. What is the market price of company B? (4 marks) e. Company C is expected to pay a dividend of 5 next year. Then, dividend growth is expected to be 20% a year for five years (ie., until year 6) and zero thereafter. What is the market price of company C? (6 marks) 1. Consider a bond with a face value of 100, 5 years to maturity and a coupon rate of 6% paid annually Identity and explain the factors that affect the price of this bond. (6 marks) Assuming bonds of similar risk in this market are currently offering a yield of 4%, calculate the price of the bond. (8 marks) 0 The current share price of Motors Pic is C20. Next year's cash dividend is 0.85 Docunty analysts are forecasting that dividends will grow by 75% per year Assume that the 7.5% growth rate is expected to continue forever. Whatrate of retum weinvestors expecting? (4 marks) (Total 40 marks)