BBB Inc. issues 1,000 bonds and 15,000 shares of equity. If BBB's systemic risk is 1.5. The riskless rate is 2% and the

[answerhappygod]

BBB Inc. issues 1,000 bonds and 15,000 shares of equity. If
BBB's systemic risk is 1.5. The riskless rate is 2% and
the market expected return is
8%.
a. What is BBB's expected return? (5')
b. If BBB just paid a dividend of $1, and plans to pay a
dividend of $2 next year and a dividend of $3 the year after next
year. After that, its dividend will grow at a constant rate of 5%.
Determine the stock price today using the expected return
calculated in part a as the required rate of return. (10')
c. Each bond of BBB is sold at $1000 and matures 20 years later.
The coupon rate is 8%. What is the yield to maturity?
(5')
d. Given the tax rate is 18%, what is BBB's weighted average
cost of capital? (10')