Anchorage 12/09

I am looking at Anchorage in the BPP revision kit, and there is no mention of P0 in part (b) and so I am puzzled by your question.

Sorry Sir, I meant the market price of a security in the dividend growth model which was used to calculate the market return to eventually get the cost of equity using CAPM

Also in part e) i), i am lost as to how the cost of the existing bond is approximately 9%.

The current dividend yield is 3.1% and therefore the current dividend = 0.031 x current MV. Use any market value you want (and then use the dividend as 0.031 x that MV) and you will end up with exactly the same answer :-)

With regard to the bond interest, it is written in the question that "the cost of Anchorage's existing 5 years bonds is approximately 9%"

Oh I see. Very helpful. Thank you Sir.

You are welcome :-)