SOLVE QUESTION 5 "c" only... I only need the answer to question 5e... Please show and explain work. Thank you

5. You are given with the following information statements of a public firm Benny in the airline industry concurrently. (Notice that all negative numbers are parenthesized). The firm has issued 12 million shares of common stock with current market price as $55/per share, the expected dividend is $6.90/per share with 3.2% growth rate, 300,000 shares of preferred stocks with promised preferred dividend and preferred stock price as $3.20/per share and $14.5/per share, respectively. The firm also has currently, 2 million 4.2%-coupon bonds with $1,000 face value that pays the coupons semi-annually. The current bond price is $820/per bond. The bonds are expected to mature at 2025. Answer the following questions:

a) If using the market prices for assessment on rates of return, what is the rate of return the common stock of Benny? What is the rate of return for their preferred stocks?

Return on common stock

55 = 6.90/(return - 3.2%)

55(return)-1.76=6.90

55(return)=8.66

Return on common stock = 15.75%

Return on Preferred stock = 3.20/14.5 = 22.07%

Cost of equity, we have no beta...

Know market price, = equity value... fine discount rate of return..

Yield to maturity, considering discount rate for the bond when assume holding bond til maturity... IRR how much rate of return I can expect for holding bond til maturity

Return (yield) to call, return or discount rate holding bond until be called

Yield to call, if the bond is call how much is the rate of return I can get until bond gets called

b) What is the bond's yield to maturity of the firm's corporate bond?

Face Value

1000

Semi-annual coupon

21

Current Price

820

Period

20

Semi annual rate

3%

Yield to Maturity

6.70%

=Rate(20, 21, -820, 1000)

Bond's Yield to maturity is 6.70%

Calculations attached (it has been assumed that the information given regarding the bond is on 2015 there-by leaving the maturity of the bond to be 10 years = 20 semi-annual periods)

c) Suppose you are also given with the following financial statements of Benny for the past three years. What are the historical returns on equity for this company for the past three years? Is the firm Benny doing well from the perspectives of shareholders? Why or why not?

d) Is this firm well-diversified with their arrangement of capital? That is, are they well diversified with different sources of capital?

• The firm is well diversified because they are operating is many different business' that are unrelated to each other and their debt-to-equity ratio has been improving.

e) Based on the given information, provide your ratios analyses. Apply the Du-Pont model and interpret your results for the firm's performance.

Net Profit Margin: net income/sales

a.2013: 6/ 3266 = 0.184%

b.2014: 3/ 3338 = 0.089%

c.2015: 5/ 3933 = 0.127%

Total Asset Turnover: sales/assets

d.2013: 3266 /3232 = 1.011

e.2014: 3338 /2470 = 1.351

f.2015: 3933 /3261 = 1.206

ROA: (net profit margin)(total asset turnover)

g.2013: 0.184% (1.011) = .19%

h.2014: 0.089% (1.351) = 0.12%

i.2015: 0.127% (1.206) = 0.15%

Equity Multiplier: total assets/total equity

j.2013: 3232 / 1182 = 2.73

k.2014: 2470 / 1289 = 1.92

l.2015: 3261 / 1351 = 2.41

ROE: ROA*Equity Multiplier (or net income/total equity)

m.2013: (.19%)(2.73) =0.519%

n.2014: (0.12%)(1.92) = 0.23%

o.2015: (0.15%) (2.41) = 0.362%

f) Provide the common size statements for both Balance Sheet and Income Statement. What kind of noticeable pattern you may identify for the firm? Is this usual for the airline industry?

Balance Sheet (in millions)

2013 20142015

Assets

Cash 3010 473

Marketable securities1001000

Accounts Receivable920 150800

Inventory310178450

Plant, Building, and Equipment's (net)187220021209

Investments in affiliates030329

Total Assets 323224703261

Liabilities

Short-term debts 507930

Advances from customers 11134134

Accounts payable 285192771

Interest payable 759862

Tax payable 127147128

Other Accrued Expenses 2015 35

Bonds payable 925686750

Stockholders' Equity

Common stock 102110551175

Additional paid-in capital 7415647

Retained earning 87 78129

Total liabilities and equities 323224703261

Income Statement(in millions)

2013 20142015

Net Sales326633383933

Cost of Goods Sold211519792510

Selling and General Expenses700812759

Depreciation Expense160298284

Interest Expense90109121

Income Tax Expense195137254

Net Income6 35