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Alberta Royalty Trust Inc. is projecting it will pay the following dividends (assume paid at the end of each year):

Year 1 $16.00

Year 2 $12.00

Year 3 $8.00

Year 4 $4.00

Year 5 $2.00

After the end of year 5 there will be no more oil in its reservoirs. Analysts are predicting the price of crude to grow at 2% per year for perpetuity. If an investor wants a 15% return and the stock is $35.00 should the investor buy the stock?

Question 28 options:

a)	No because the firm is valued at $42.00 and can be bought for $35.00
b)	Yes because the firm is valued at $31.53 and can be bought for $35.00
c)	None of these answers
d)	Yes because the firm is valued at $39.18 and can be brought for $35.00
e)	No because the firm is valued at $31.53 and can be bought for $35.00

calculate the WACC for Aya Ltd, using the following:

Debt:	5,000 outstanding, 6% semi-annual coupon bonds, with 25 years to maturity and selling for 105;
Common Stock:	175,000 shares outstanding, selling for $58.00 per share, with a beta of 1.10
Market:	equity risk premium of 7% and 5% risk free rate.
Tax Rate:	35%

Question 30 options:

a)	9.62%
b)	5.63%
c)	10.39%
d)	None of these answers.
e)	9.63%

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