Question
You have been asked to evaluate the investment opportunity for a company your firm would like to invest in. From all the available data that
You have been asked to evaluate the investment opportunity for a company your firm would like to invest in. From all the available data that you have compiled, you have summarized the following information. 2,500,000 shares of common stock outstanding at $1 par. Current market value of common stock is $24.43 per share. Annual dividends per share is $1.95 $1,750,000 bonds, 6.25% coupon, with a current market value of $104(price of $104 for every $100 bond). $2,250,000 bonds, 5.75% coupon, with a current market value of $94.50(price of $94.50 for every $100 bond). The corporate tax rate is 35%. 950,000 share of preferred stock outstanding, par $10 with a stated preferred dividend rate of 5% and a current market value of preferred stock is $15.63 per share. Calculate the current market yield, for an outside investor, for the following: 1. Common stock 2. 6.25% bond 3. 5.75% bond 4. Preferred bond
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