1. The Bradman Corporation issued preference shares with a stated dividend of 8% of par.

Preference shares of this type currently yields 7% with a par value of $75. Assume that the company has 800 000 preference shares outstanding at this time and that the dividends are paid annually. Reviewing its income statement, the EBIT is $85 million and it has annual interest payments of $3 million. The firm is in the 30% tax bracket.

a. What is the value of Bradman’s preference shares?

b. What is the fixed charge coverage of Bradman’s preference shares?