Questions 11 and 12 are based on the same information below. DownUnder Financial recently paid a dividend of 1.80 Australian dollars (A$). An analyst has examined the financial statements and historical dividend policy of DownUnder and expects that the firm’s dividend rate will grow at a constant rate of 3.5% indefinitely. The analyst also determines DownUnder’s beta is 1.5, the risk-free rate is 4%, and the expected return on the market portfolio is 8%. Estimate DownUnder’s required return. Show all your work.

Please note there is one of this sheet here, one at the end of the test and one in the middle. Hopefully this will make it more convenient to access throughout the test. Test 3 Formula Sheet.pdf

Light Construction Machinery Company has an expected ROE of 11%. The dividend growth rate will be _______ if the firm follows a policy of paying 25% of earnings in the form of dividends.

Based on information of Question 15, calculate the theoretical value of Barlow Energy’s equity. Show all your work.

FinCorp’s free cash flow to the firm is reported as $205 million. The firm’s interest expense is $22 million. Assume the corporate tax rate is 21% and the net debt of the firm increases by $3 million. What is the value of total equity if the FCFE is projected to grow at 3% indefinitely and the cost of equity is 12%? Show all your work.

Questions 11 and 12 are based on the same information below. DownUnder Financial recently paid a dividend of 1.80 Australian dollars (A$). An analyst has examined the financial statements and historical dividend policy of DownUnder and expects that the firm’s dividend rate will grow at a constant rate of 3.5% indefinitely. The analyst also determines DownUnder’s beta is 1.5, the risk-free rate is 4%, and the expected return on the market portfolio is 8%. Estimate DownUnder’s required return. Show all your work.

Light Construction Machinery Company has an expected ROE of 11%. The dividend growth rate will be _______ if the firm follows a policy of paying 25% of earnings in the form of dividends.

Based on information of Question 15, calculate the theoretical value of Barlow Energy’s equity. Show all your work.

FinCorp’s free cash flow to the firm is reported as $205 million. The firm’s interest expense is $22 million. Assume the corporate tax rate is 21% and the net debt of the firm increases by $3 million. What is the value of total equity if the FCFE is projected to grow at 3% indefinitely and the cost of equity is 12%? Show all your work.

Based on information of Question 15, calculate the current FCFE of Barlow Energy. Show all your work.