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Question text Aires plc was recently formed and issued 80 million 0.50 shares at nominal value and loan notes totalling 24 million. The business used

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Aires plc was recently formed and issued 80 million 0.50 shares at nominal value and loan notes totalling 24 million. The business used the proceeds from the capital issues to purchase the remaining lease on some commercial properties. Aires plc plans to set up a wholesaling business that is expected to generate an operating profit of 12 million each year. The lease will expire in four years time. At the end of the four years, the business will be wound up and the lease will have no residual value.

The required rate of return by investors is 12 per cent.

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