Suppose Company ABC Ltd. is the manufacturer of Refrigerators and this company is counted in top ten companies of Pakistan with high market capitalization and quality production. The company is consistent in generating profits each year, hence its share is considered as an attractive investment for investors. The company has captured major market shares and is very keen about its Going Concern Value, because its management believes that if they will not grow they will liquidate. Why the going concern value is so important for company and they are escaping from liquidation value.

The company is currently focusing to expand its business units therefore it needs extra funds to purchase new assets. The company has already issued both preferred and common stock in the market. You are supposed to calculate value per share of preferred stock, if company is able to sell 18% preferred stock issue at Rs.100 par value and the required rate of return on this investment is 15%.

However the demand of companys Common stock is increasing day by day in the market. The Companys financial highlights show that it has announced Rs. 6 dividend on common stock this year. According to investor expectations it would grow at the rate of 5% for next 3 years, then at the rate of 6% for next 3 years and then at the rate of 7% thereafter. If required rate of return of investor is 14%.Calculate the intrinsic value of share.

The companys financial analysist has proposed the directors to issue Perpetual Bonds and Coupon Bonds to raise funds instead of taking loan from banks. For this purpose company is also analyzing that if Rs.1000 par value bond with coupon rate of 11% is issued in marker for maturity period of 14 years then what would be the current market price of bond keeping in view that investors required rate of return on this bond is 10%. You are supposed to calculate value of this bond and also highlight difference between perpetual bond and coupon bond.

Furthermore another idea is to raise funds by taking long term debt from financing company. The Financing Company requires to pay back loan in equal installments at the beginning of each year. Hence if company avail this option and pays Rs. 10000 at the beginning of each year for the next 8 years to financing firm then what amount will accumulate after 8 years as companys total debt worth? Assume an interest rate of 15% compounded annually.