QUESTION

 

ASSETS Cash Accounts Receivable Inventory Property, plant & equipment Total Assets Notes 1. 2. 3. 4. Hawthorn Manufacturing Company Ltd Balance Sheet as at 31/12/19 6. 150 200 640 1.120 2.110 LIABILITIES Accounts payable Bank loan (interest only) Mortgage Loan Corporate bonds The market risk premium is 10%. Total liabilities SHAREHOLDERS' EQUITY Ordinary shares Preference Shares Notes. 123 45 Retained earnings Total shareholders' equity Total liabilities and shareholders' equity 5. The preference shares have a par value of $1 each and are shown on the Balance Sheet at their par value. They pay a constant dividend of $000 and they are currently trading for $1,02. 130 200 500 310 1.140 The interest rate on the bank loan is 8,2% p.a. The interest rate on the mortgage loan is 5,2% p.a. The corporate bonds have a credit rating of AAA and have 2 years to maturity. They make semi-annual coupon payments at a coupon rate of 5% p.a. 450 230 290 970 2.110 The ordinary shares are shown on the balance sheet at their book value of $1 per share. They have a beta of 1,9. They have just paid a dividend of $000. The dividend is expected to grow at a rate of 9% p.a. for the next 3 years, and after that it will grow at a constant rate of 3% p.a. in perpetuity.