Answered step by step
Verified Expert Solution
Question
1 Approved Answer
need answer of all the parts i.e. a, b and c. for part A use the following formula: BV=C[1-(1+r)-t/r]+F/(1+r)t Question 3: Blooming Ltd. currently has
need answer of all the parts i.e. a, b and c. for part A use the following formula: BV=C[1-(1+r)-t/r]+F/(1+r)t
Question 3: Blooming Ltd. currently has the following capital structure: Debt: $2,500,000 par value of outstanding bond that pays annually 12% coupon rate with an annual before-tax yield to maturity of 10%. The bond issue has face value of $1,000 and will mature in 25 years. Ordinary shares: 65,000 outstanding ordinary shares. The firm plans to pay a $7.50 dividend per share in the next financial year. The firm is maintaining 3% annual growth rate in dividend, which is expected to continue indefinitely. Preferred shares: 40 000 outstanding preferred shares with face value of $100, paying fixed dividend rate of 14%. Company tax rate is 30% Required: Complete the following tasks: Only work on questions a, b and c a) Calculate the current price of the corporate bond? b) Calculate the current price of the ordinary share if the average return of the shares in the same industry is 9%? c) Calculate the current value of the preferred share if the average return of the shares in the same industry is 12%Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started