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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 dividend 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 common stock is $15.63 per share
Please calculate the current market yield, for an outside investor, for the:
- Common stock
- 6.25% bond
- 5.75% bond
- Preferred bond.
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