Question
H&D is a U.S. multinational company with the following debt and equity components in its consolidated capital section. The company's cost of equity is 18%
H&D is a U.S. multinational company with the following debt and equity components in its consolidated capital section. The company's cost of equity is 18% (Note that company has debt in two different currencies)
Assumptions Value
Tax Rate 30.00%
Debt-1: Euro8,000,000, 10-year 6% coupon Euro Bonds issued in Euros selling at par
Debt-2: Pound 4,000,000 20 year 8% coupon Pound denominated Bonds selling at par
Spot Rate EUR/USD 1.15
1 year Forward Rate EUR/USD 1.25
Spot Rate GBP/USD 1.75
1 Year Forward Rate GBP/USD 1.65
Common Stock $40,000,000
Retained Earnings $5,000,000
a. what is the current value of the 10 year bond?
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Financial Management Theory And Practice
Authors: Prasanna Chandra
8th Edition
0071078401, 978-0071078405
