Question $2.$ Alpha Tech Ltd$.$

The following financial information relates to Alpha Tech Ltd:

Statement of profit or loss information for the last year $($in min USD$)$

$\backslash$table$[[$PBIT$,15],[$Interest$,5],[$PBT$,10],[$Tax$,3],[$PAT$,7],[$Dividends$,2],[$Retained profit $5,]]$

Statement of financial position information as at the end of the last year $($in min USD$)$

$\backslash$table$[[$Ordinary shares, nominal value $50$c$,10,],[$Retained Earnings,$25,],[$Total Equity,,$35],[,,],[5\%$ loan notes, redeemable in four years' time,$10,],[$Total equity and non$-$current liabilities,$45,]]$

Market value of $5\%$ loan notes, redeemable in four years' time is $$102.$ Tax rate is $30\%.$ The board of Alpha Tech Ltd$.$ is considering two proposals put forward by its finance director. Each proposal is independent of any other proposal.

Proposal A

The company should increase its current dividend per share by $15\%$ in order to attract more equity investors and improve shareholder satisfaction. Cost of equity is $10\%.$

Proposal B

A bond issue should be made to raise $$10$ million in new debt capital. While no immediate investment opportunities exist, the cash raised would be held in short$-$term instruments $($e$.$g$.,$ money market funds$)$ until a more suitable investment opportunity is identified. The bonds would pay an interest rate of $8\%$ per year and be redeemable at face value in $3$ years. Market value for these bonds is $$98.$

REQUIRED:

Find the current share price, WACC and gearing.

Find the share price, WACC and gearing for Proposals A and $B.$

List the assumptions of DVM model and CAPM model.