Short Answer Question 1 (Total 8 marks) GEM Inc produces sewing equlpments, Based on its balance sheet, it has 100,000 bonds with 5100 par. Its: bonds paty a semi-anntial coupon of 85 per year and have 6 years to maturity. The next coupon date is in 6 months GEM's current bond yield is 105 per year with semi-annual compounding. The company has 11 million shares on issue and the share price is 52 per share. consistent with the prediction of the Gordon Growth Model. The company maintains a constant payout ratio of 8056 and it paid an annual dividend of 50.2. per share yesterday. The return on equity (ROE) of the company is 15% p.a. GEM also has retained earnings of $20 million in its balance sheet. XYZ's management considers bullding a new plant. The risk-free rate is 3%. per year annually compounded and the market risk premium is 6% per year annually compounded. The corporation tax rate is 30%. a) Determine the price of GEM Inc:'s bonds (i.e. price. per bond), rounded to the nearest cent ( 2 mark). b) Determine GEM Inc's cost of equity ( 2 marks) c) Determine the total market value of GEM's assets (1 marks) d) Determine the weighted average cost of capital for the company, assuming the company is subject to the classical tax system