Rob wants to start his own restaurant company.He wants to finance the company using debt, preferred stocks, and common stocks.He has decided to set up his capital structure with 40% debt, 5% preferred stocks, and 55% common stocks.Market statistics: the risk-free rate is 2% and the market rate is 8%.

1.Suppose a bond pays $180 at the end of each year forever. If 8% is the relevant interest rate, what is the value of this investment to you today?

Bond Price=

2.Rob wants to sell preferred stocks on the NYSE.His expected dividend is $1.50, and the required rate of return on the stock is 8%.At what price should Rob sell his preferred stock?

Preferred stock price =

3.Rob also wants to issue common stocks with a beta of 1.4.His projected dividend is $0.87, and the growth rate of his company is projected at 15%.At what price should he sell his stocks?

R_s (required rate of return) =

Common stock price =