Question 3 -1000 words) Peach Plc has three main sources of capital; bonds, ordinary shares and preference shares. After carefully studying the latest reports and data for the company you have be able to confirm: Over recent years, the company has recorded a steady pay-out ratio of 35% this is set to continue in the future There are 500 million preference shares, the current price per preference share is 1.10 and it pays a fixed dividend of 11p per year There are 400 million ordinary shares and these shareholders have an expected rate of return of 14.45% There are 10 million bonds in issue, each bond has a coupon rate of 7%, a face value of 100 and a yield to maturity of 4% Corporation tax is 17% The dividend history for the firm is shown below. The 2020 dividend has just been paid. Year Dividend (p) 2015 12.0 2016 13.0 2017 14.0 2018 15.5 2019 16.8 2020 18.0 a) Estimate the growth rate for the company. (3 marks) b) Calculate the return on equity (ROE) that Peach Plc is achieving. (2 marks) c) What is the total market value of the ordinary shares of the firm? (2 marks) d) Calculate the Weighted Average Cost of Capital (WACC) for the company. (4 marks) e) Critically discuss the Capital Asset Pricing Model (CAPM). Your answer should include assumptions, conclusions, empirical evidence and alternatives. (14 marks) (Total 25 marks) Continued