Long-term Debt Bonds: Par $100, semi-annual coupon 14% p.a., 6 yrs to maturity - Bonds = 1,000,000

Equity Preference Shares: Par $10, annual dividend 60 cents per share - Preference = $100,000

Ordinary Shares: 1 million issued - $2,000,000

Total = $3,100,000

From the financial markets, your client has ascertained the following:

Yield to maturity on 6 yr Entroc Ltd. corporate bonds: 6% p.a.

The required return on Entroc Ltd. preference shares: 9% p.a. Entroc Ltd. ordinary shares last dividend declared: $0.20 Forecast future growth rate of Entroc Ltd. ordinary share dividend: 5% p.a.

The required return on Entroc Ltd. ordinary shares: 12% p.a. Required:

(a) Calculate the intrinsic/market valuation on 31 March 2023 of one Entroc Ltd.:

(i) bond

(ii) preference share

(iii) ordinary share.

(b)Calculate the total intrinsic/market valuation on 31 March 2023 of EntrocLtds:

(i) Long-term debt

(ii) preference shares

(iii) ordinary shares.

(c) Compare the book and market values for each of the long-term sources of finance currently used by Entroc Ltd. and briefly explain why any differences that your client observes have occurred.