Answered step by step
Verified Expert Solution
Link Copied!

Question

00
1 Approved Answer

Dear lecturers, can you help me to solve this question ? your help will be very much appreciated. Thank you Problem 5 (25 points) Problem

Dear lecturers, can you help me to solve this question ? your help will be very much appreciated. Thank you image text in transcribed

image text in transcribed

Problem 5 (25 points) Problem 5 A (10 pts) To fund PT. KFC business expansion, the company intends to obtain funds by offering both additional shares to the public, as well as issue bonds. PT. KFC management must accurately set the offering price of the additional shares that will be issued. Following the latest Annual Shareholders meeting the company has just paid out a dividend of Rp 570/per share; Mr. Akmal confidently assesses that the company will experience a super normal rate of growth. This is predominantly based latest update regarding the development Covid-19 vaccines, estimating that most Pharmaceutical companies will be able to complete the last phase of their clinical test by end of 2020. This has provided some positive sentiment on the potential rebound and recovery of the economy. Based on such news Mr. Akmal predicts that in the next 3 years there will be able to achieve super normal dividend growth of 8%, and for the following two years achieve growth the rate of 6%, before subsequently maintaining a growth rate of 5% perpetually If the required rate of return is set at 12.5%, what will be the price of PT. KFC's stock valuation Problem 5B (15 pts) After the successful offering of shares to the public through the company's IPO ten years ago, PT. KFC is planning their first issuance of corporate bonds for the total amount of Rp. 500 billion with a maturity of 5 years. The funds raised from the bonds will be used to settle the company's outstanding bank loans which are maturing early next year. In agreement with the underwriter the bonds will have minimum denomination of Rp. 50 million and coupon rate of 10%, payable semi-annually. As an investor, your required rate of return is 8%, you are considering investing in the bond but is still unsure if you are able to get the required return. a. If PT. KFC's bonds are sold at the price of Rp. 47.000.000,- will it be worthwhile for you to invest? Please state clearly the underlying reasoning of your assessment (5 pts) b. From a different perspective, please perform the assessment for three groups of Institutional investors which are also interested to purchase PT KFC bonds, but each has their own required rate of returns, namely set at rate of 7%, 10% and 15% respectively, what will it be the individual value of the bonds from the point of assessment of each of these three groups of institutional investors? Explain the results of your calculation accordingly. (10 pts) Problem 5 (25 points) Problem 5 A (10 pts) To fund PT. KFC business expansion, the company intends to obtain funds by offering both additional shares to the public, as well as issue bonds. PT. KFC management must accurately set the offering price of the additional shares that will be issued. Following the latest Annual Shareholders meeting the company has just paid out a dividend of Rp 570/per share; Mr. Akmal confidently assesses that the company will experience a super normal rate of growth. This is predominantly based latest update regarding the development Covid-19 vaccines, estimating that most Pharmaceutical companies will be able to complete the last phase of their clinical test by end of 2020. This has provided some positive sentiment on the potential rebound and recovery of the economy. Based on such news Mr. Akmal predicts that in the next 3 years there will be able to achieve super normal dividend growth of 8%, and for the following two years achieve growth the rate of 6%, before subsequently maintaining a growth rate of 5% perpetually If the required rate of return is set at 12.5%, what will be the price of PT. KFC's stock valuation Problem 5B (15 pts) After the successful offering of shares to the public through the company's IPO ten years ago, PT. KFC is planning their first issuance of corporate bonds for the total amount of Rp. 500 billion with a maturity of 5 years. The funds raised from the bonds will be used to settle the company's outstanding bank loans which are maturing early next year. In agreement with the underwriter the bonds will have minimum denomination of Rp. 50 million and coupon rate of 10%, payable semi-annually. As an investor, your required rate of return is 8%, you are considering investing in the bond but is still unsure if you are able to get the required return. a. If PT. KFC's bonds are sold at the price of Rp. 47.000.000,- will it be worthwhile for you to invest? Please state clearly the underlying reasoning of your assessment (5 pts) b. From a different perspective, please perform the assessment for three groups of Institutional investors which are also interested to purchase PT KFC bonds, but each has their own required rate of returns, namely set at rate of 7%, 10% and 15% respectively, what will it be the individual value of the bonds from the point of assessment of each of these three groups of institutional investors? Explain the results of your calculation accordingly. (10 pts)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Accounting questions