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Please add some formulas as well so that I can understand the way sum has been solved Question 3: Blooming Ltd. currently has the following
Please add some formulas as well so that I can understand the way sum has been solved
Question 3: Blooming Ltd. currently has the following capital structure: Debt: $2,500,000 par value of outstanding un-callable bond that pays annually 12% coupon rate with a yield to maturity of 10%. The bond 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% Required: Complete the following tasks: 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% Formulas Learnt in this topic: oStep by Step Solution
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