You are an investor in Purple Beast Ltd, an Australian manufacturer of petrol-driven sports cars.

You hold:

• 400 ordinary shares
• 300 preference shares
• 400 fixed-rate bonds
• 100 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 10% 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 $200, 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%. A coupon payment is due today. The BBSW took on the following values on the following dates:

• Today: 4.3%
• 6 months ago: 4.9%
• 12 months ago: 4.7%

The AGM is today. If the Board of Directors declares that a total of $13 million will be paid in dividends this year, how much will you receive in preference share dividends?

a.

$3900

b.

$0

c.

$3000

d.

$6000

The AGM is today. If the Board of Directors declares that a total of $13 million will be paid in dividends this year, how much will you receive in ordinary share dividends?

a.

$0

b.

$5200

c.

$2400

d.

$1200

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

a.

$81600

b.

$83200

c.

$1600

d.

$80000

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

a.

$945

b.

$2070

c.

$1035

d.

$1890