You are an investor in Orange Sunset Ltd. You hold:

• 300 ordinary shares
• 200 preference shares
• 300 fixed-rate bonds
• 400 floating-rate bonds

The following information relates to your holdings:

(a) There are 1 million ordinary shares on issue, which carry full voting rights. Cumulative voting is used at the AGM.

(b) There are 1 million preference shares on issue. The preference dividend is equal to 7% of the nominal face value of $100. The company made a loss last year and no dividends were paid (although all dividends were paid in all previous years). The preference shares are cumulative.

(c) The fixed-rate bonds have a face value of $300, pay semi-annual coupon payments at a coupon rate of 4% p.a., and will mature today.

(d) The floating-rate bonds have a face value of $300 and pay semi-annual coupon payments based on BBSW plus a margin of 2.9%. A coupon payment is due today. The BBSW took on the following values on the following dates:

• Today: 4.5%
• 6 months ago: 4.6%
• 12 months ago: 4.3%

QUESTION 1

The AGM is today. There are 3 positions on the Board of Directors that need to be filled at the AGM. You favour one particular candidate, Emily Jones. What is the maximum number of votes that you can cast for Ms Jones at the AGM?

a.

900

b.

100

c.

300

d.

3

QUESTION 2

The AGM is today. If the Board of Directors declares that a total of $17 million will be paid in dividends this year, how much will you receive in preference share dividends?

a.

$0

b.

$2800

c.

$1400

d.

$4200

QUESTION 3

The AGM is today. If the Board of Directors declares that a total of $17 million will be paid in dividends this year, how much will you receive in ordinary share dividends?

a.

$0

b.

$3000

c.

$1800

d.

$900

QUESTION 4

The AGM is today. If the Board of Directors declares that a total of $17 million will be paid in dividends this year, how much will you receive in preference share dividends?

a.

$1400

b.

$2800

c.

$0

d.

$2000

QUESTION 5

The AGM is today. If the Board of Directors declares that a total of $17 million will be paid in dividends this year, how much will you receive in ordinary share dividends?

a.

$0

b.

$3000

c.

$1800

d.

$900

QUESTION 6

What will be your final cash flow, due today, from your fixed-rate bonds?

a.

$1800

b.

$91800

c.

$90000

d.

$93600

QUESTION 7

What will be your total coupon payment, due today, on the floating-rate bonds?

a.

$8880

b.

$4500

c.

$4440

d.

$9000