This question has three sub questions (a), (b), and (c) Paradise Limited has just paid the (annual) dividend of $2 per share The companys dividend is expected to grow by 15 in the first year and by 10 from the first year to the second year The dividend growth rate will stay at a constant 6 per annum thereafter If the cost of equity is 12 , what is the fair value of the companys share at present (5 marks) Paradise Limited operates many hotels in Sydney and Melbourne To the investors of Paradise, is COVID 19 considered a source of systematic risk or unsystematic risk Briefly explain your answers (2 marks) c Prior to COVID 19, Paradise Limited borrowed a lot of money from Bank XYZ Now that Paradise is in financial trouble, describe the agency costs that Bank XYZ may potentially face due to the actions of the Paradise What could Bank XYZ do to prevent such agency costs in the first place

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Question: This question has three sub-questions: (a), (b), and (c) Paradise Limited has just paid the (annual) dividend of $2 per share. The companys dividend is

This question has three sub-questions: (a), (b), and (c)

Paradise Limited has just paid the (annual) dividend of $2 per share. The companys dividend is expected to grow by 15% in the first year and by 10% from the first year to the second year. The dividend growth rate will stay at a constant 6% per annum thereafter. If the cost of equity is 12%, what is the fair value of the companys share at present? (5 marks)
Paradise Limited operates many hotels in Sydney and Melbourne. To the investors of Paradise, is COVID-19 considered a source of systematic risk or unsystematic risk? Briefly explain your answers. (2 marks)

c Prior to COVID-19, Paradise Limited borrowed a lot of money from Bank XYZ. Now that Paradise is in financial trouble, describe the agency costs that Bank XYZ may potentially face due to the actions of the Paradise. What could Bank XYZ do to prevent such agency costs in the first place?

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