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The book is Healthcare Finance by Gapenski Reiter 6th edition ISBN 9781567937411
Equity financing and securities for questions 12.1 - 12.6 and Capital structure and cost of capital for question 13.3 . Please show all work.
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Surname 1
Name
Supervisor
Course
Date
Problem 12.1
Answer
Company D
Company G
Last dividend paid = $6
Last dividend paid = $6
For dividends = $6
For growth = $2
Constant growth = 0%
Constant growth = 8.33%
Required rate of return = 15%
Required rate of return = 15%
Expected prices of stock= Stock price*(1+G) N
Expected prices of stock= Stock price*(1+G) N
Stock price= (1+G)* LDP / {R(R) -E(R)}
Stock price= (1+G)* LDP / {R(R) -E(R)}
Stock price = (1+0%) X 6/ (15%-0%) = $40
Stock price = (1+8.33%) X 6/ (15%-8.33%) = $97.45
Intrinsic values of stocks = $40 x (1+0%) 1 =
Intrinsic values of stocks = $97.45 x (1+8.33%) 1 =
$40
$105.57
Surname 2
Problem 12.2
Answer
The last dividend paid (D0) = $2.40
...
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