MS (Pty) Limited issued a 10-year bond four years ago at a par value of R1 000. The bond pays a semi-annual coupon of 10%p.a.

Required:

(i) Determine the bond value assuming the YTM is: (i) 8% p.a (ii) 12% p.a.

(ii) Briefly discuss what you would expect in the firms bond trust deed

(iii) Ms (Pty) Limited expects the current dividend of R1.10 to grow at 11 percent for the next five years, and that the growth rate will decline to 8 percent and remain at that level thereafter. You feel that your estimate of beta is unreliable, so you will be using the bond yield plus risk premium method to estimate the required rate of return on the stock. The yield to maturity of MS long-term bond is 6.67 percent. The risk premium is 4.0 percent. Determine the value of MS shares.

(iv) The nominal value of MS (Pty) Ltd preference share is R100. The preference dividend is 8% of nominal value. The yield/ required rate of return for the preference shares is 10%.

Determine the value of MS (Pty) Ltd preference share.