The company has a beta of 0.8, the risk-free rate of return is currently 7%, and the market return is 9%. The company plans to pay a dividend of $2.60 in the coming year and anticipates that its future dividends will increase at an annual consistent of 5% for the forseeable future. Required: a) Calculate the required return on the company's ordinary shares using the Capital Asset Pricing Model (CAPM). b) Estimate the value of the company's ordinary shares using the Constant-Growth Dividend Model (Use the required rate of return calculated in part (a) ). 2. Weighted Average Cost of Capital (WACC) The company has a capital structure based on current market values as follow: Type Weighting Returns required by investors Debt 50% Preference Shares 10% Ordinary Shares 40% 8% 10% Calculated in part 1(a) Required: Calculate the company's after-tax WACC, assuming the firm's marginal tax rate is 35%. 3. Capital Budgeting Projects The Management of Agri-Mach Enterprises are evaluating two new robotic systems of equal risk, to use in it's production line. The company's cost of capital is 12%. The costs and the cash flows for these systems are shown below. System 1 System 2 Initial Investment Year $800,000 $500,000 Cash inflows 1 $150,000 2 200,000 3 250,000 4 30,000 5 35,000 $150,000 $150,000 $150,000 $150,000 $150,000 Required: a) Calculate each system's Payback Period. b) Calculate the Net Present Value (NPV) for each system. c) Indicate which system you would recommend, substantiating your reasons. 4. Bond Issue In order to fund the new robotic systems, the company is considering issuing a 5 year bond, with a face value of $1000 and a coupon rate of 11%, the interest rate for similar bonds is currently 9%. Required: Calculate the current market price of the 5 year bond, assuming annual payments