Question 342.5 pts

Burgos Co. declared dividends amounting to Php1.50 per share this year out of its Php500,000 net income during the year. The following summarizes the shareholders equity of Burgos Co.:

• Total authorized shares - 500,000 shares
• Issued shares - 100,000 shares
• Treasury shares - 10,000 shares
• Total shareholders' equity - Php2,500,000

What is the estimated growth rate of Burgos Co.'s dividends?

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Question 352.5 pts

AlphaGet is currently assessing the value of its securities and have obtained the following information that should provide AlphaGet with the necessary information to estimate the value of its securities:

• Current long-term government securities carry a yield of 6.5% which includes an inflation premium of 1.25%
• Based on the credit rating of AlphaGet of BAA, the estimated credit spread of AlphaGet is at 2.5%
• Utilizing the work of an external expert, beta of AlphaGet is estimated at +1.5 for marginal investors
• Diversified investors in the market is currently demanding a 2.0% premium over government securities

The following are the current instruments issued by AlphaGet:

• Bond A carries a 5-year tenor and will mature in 3 years with a face value of Php250,000 carrying a coupon of 7.75%
• Bond B carries a 10-year tenor and will mature in 5 years with a face value of Php500,000 carrying a coupon of 6.5%
• Bond C carries a 5-year tenor and was just recently issued with a face value of Php500,000 carrying a coupon of 8.0%

AlphaGet had historically paid dividends out at a rate of 10% of its net income. Dividends paid out this year amounted to Php120.00 per share and is expected to grow by 5% per year over the next 5 years before stabilizing at 3.5% perpetually after year five.

What is the expected price of AlphaGet's common share assuming that AlphaGet's dividends are expected to grow by 5% perpetually instead of just for the first five year?

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Question 362.5 pts

Value+ is currently estimating the value of its debt and equity instruments and had obtained the following information:

• Long-term government securities currently trade at a yield of 4.5%
• Cost of debt was estimated at 6.5% factoring the credit riskiness of Value+
• 60% of its profits are historically recapitalized into the business but this is expected to be at 80% beginning next year as Value+ expands into the Chinese market
• Current year profit is at Php500,000 and total shareholder's equity is at Php5,000,000 with 100,000 outstanding common shares
• Shares currently trade at Php54.00

What is the growth rate of Value+?