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Question 2 (28 points) The weighted average cost of capital (WACC) involves the cost of common stock. The following questions are used to estimate the cost of equity through the Capital Asset Pricing Model (CAPM) and the dividend growth model. you have information on the following stocks: stock market risk premium B 6.50% 0.8 AL Bank KT Bank 6.50% 1.6 Such as the Capital Asset Pricing Model (Capital Asset Pricing Model CAPM) is effective, and now the risk-free rate of return is 4.6%. Calculate the expected returns for the above two stocks separately. (8 points) = b. L1 Bank was listed in Hong Kong last year, and its share price can be reflected in CAPM. Also, you get information on L1 stock: expected return of 18.2%, dividend for the year is $5.6, expected annual dividend growth rate of 2%. Try to calculate the share price of L1. (8 points) draw the three stocks AL, KT and L1 on the Securities Market Line (SML) respectively. Combining the information in (a) and (b), which stock would you choose? Please explain your choice. (12 points)
HS is considering two mutually exclusive new product initiatives - Diet Soda and Wellness juice: yo 1 Cash Flow (diet soda) -$3,437,500.0 $1,250,000,0 $1,562,500.0 $1.875,000.0 $312,500.0 Cash flow (vegetable juice) -$3,437,500.0 $312,500.0 $1,875,000.0 $1,562,500.0 $1.562,500.0 2 3 4 13280C Jobs the required rate of return is 10%, what is the NPV of these two product plans? It HS Company adopts the NPV method, which plan should the company accept? (10 points) b. What is the IRR for the two product plans? If HS Company adopts the IRR method. which plan should the company accept? Is it the same as in (a)? Please explain (12 points) addition to the NPV and IRR mothods, what other mothods can HS so to analyze the capital budgets of the above two programs? Please briefly explain. (8 points)
1. 10,000,000 shares of common stock with a par value of $1 are outstanding and sell for $5 per share. The company's next dividend will be $0.2 per share, which will grow at a rate of 5% per year. 2.5,500 bonds with a coupon rate of 4% are in circulation and mature in 10 years. The face value of each bond is $10,000. Interest is paid semi-annually and sold at face value. 3. A long-term bank loan of $18,000,000 with an annual interest rate of 3.5%. 4. Retained earnings of $24,000,000. 5. Assume the corporate tax rate is 19%. Please calculate the weighted average cost of capital (WACC) of Tianrong Group o