1.Gibre Ltd currently has 8 million shares on issue. Gibre is expected to pay no dividends for the next 4...
1.Gibre Ltd currently has 8 million shares on issue. Gibre is expected to pay no dividends for the next 4 years due to its current expansion strategy. Starting from year 5, Gibre is then expected to pay a dividend of $0.10, growing at a rate of 3% per year forever (i.e., $0.10 in year 5, $0.103, and so on). If the required return on equity is 10% p.a. with monthly compounding, what is the current total equity value (i.e., market capitalization) of Gibre Ltd?
2.The expected return on Asset A is 6% per year, Asset B is 8% per year, and Asset C is 9% per year. If I invest $100,000 today in a portfolio that is equally-weighted across assets A, B and C, what will be my expected portfolio value at the end of 10 years?
3.Gohn would like to construct a portfolio composed of two assets JRG and SRT with a TARGET expected return of 10%. Looking forward, the unlevered beta of JRG Ltd is 0.8 and the unlevered beta of SRT Ltd is 1.8; both JRG and SRTare financed with $200 million bonds and $300 million common shares; company tax rate is 30%; the excess market premium is 6% and the risk-free rate is 2%. What should Gohn set the weighting of his investment in JRG to ensure he is just able to reach his target?