NAB Ltd current share price is $30 and it has just paid a $1.50 dividend. Dividends of NAB are expected to grow at the rate of 5% per year. A. What is an estimated return that shareholders of NAB expect to earn? B. NAB Ltd also has preference share outstanding that pays fixed dividend of $2.30 per share. If preference stock is currently priced at $25, what is the return that preference share holders expect to earn? C. Five years ago NAB Ltd issued 15 year bond with face value of $1000 and coupon rate of 9%. The price of these bonds is currently is $950. What is NAB- pre-tax and after-tax cost of debt? D. NAB Ltd has 5000,000 ordinary shares outstanding and 1,500,000 preference shares outstanding, and its equity has a total book value of $50,000,000. Its liability has a book value of $25,000,000. If NAB- ordinary and preference shares are priced as in parts (A) and (B) above, what is the market value of NAB- assets? E. What is weighted average cost of capital (WACC) F. If NAB- liability increase by 100%. How the increase in liability will affect WACC of NAB. Explain. Tax rate is 30%.
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