Series 5 Roberts Limited. has developed new technology that has given it a competitive advantage over its competitors. This, it expects will increase its profitability until its rivals can develop their own technological answers. The firm thinks that its advantage will last for three years, and estimates that its growth in profits and dividends will be 12% for the first year, 11% for the second and 9% the third year, before decreasing to a constant 5% starting in the fourth year. Cost of capital is expected to be 20%, and its last dividend was $1.65. () What is the stock's terminal value? (5 marks) (ii) What is the current share price (PO)? (8 marks) (iii) What is the expected share price for the year (P2)? (6 marks) (iv) The preferred stock of Johnsons Inc. pays an annual dividend of $8.20. What is the price of the preferred stock if the required return is: (6 marks) a) 5% b) 7% c) 12% Question 2 (25 Marks) Solar 123 Limited (SL) is operating in the booming energy sector. The company recognised that to stay competitive it must implement projects which would reduce the cost of the products to its customers. SL's board of directors approved the recommendation to finance the project by issuing new debt. On January 1, 2019, SL issued new bonds which will mature on December 31, 2038. The bonds have a par value of $1,000 and a coupon rate of 13%. Coupon payments are made semi- annually. 1. What would be the value of the bonds on December 21, 2021, if the interest rates had risen to 18%? Based on the price of the bond, how would you classify the bond? (9 Marks) II. What would be their value on June 30, 2027, if interest rates had fallen to 10%? Based on the price of the bond, how would you classify the nd? (9 Marks) III. If the bonds had a value of $1,090.00 on June 30,2027, what would be their yield to maturity on that date