2)A firm has a corporate bond traded in the secondary market. The maturity of this bond is 4 years and annual coupon interest rate is %25. The bond pays annual coupons and par value is 100 TL. The market price of this bond is 104 TL. Corporate tax is %20. This firm paid 1 TL per share dividend this year and the dividends are expected to grow at a rate of %8. The market price of one share is 5 TL. The beta of the firm is 1.35 and the risk free rate is %20. The firm targets a Debt/Equity ratio of 0.6. Estimate the approximate WACC for this firm.
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- a. A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 10.2 percent. Interest payments are $51.00 and are paid semiannually. The bonds have a current market value of $1,123 and will mature in 10 years. The firm's marginal tax rate is 34 percet. b. A new common stock issue that paid a $1.79 dividend last year. The firm's dividends are expected to continue to grow at 7.3 percent per year, forever. The price of the firm's common stock is now $27.87. c. A preferred stock that sells for $132, pays a dividend of 8.7 percent, and has a $100 par value. d. A bond selling to yield 11.3 percent where the firm's tax rate is 34 percent. Question content area bottom Part 1 a. The after-tax cost of debt is_____%Eastern Bank Limited (EBL) has issued a12% Semi-annual Corporate Bond of Tk. 1000 for 8 years. The YTM is 10%. Required: i. Market Price of Bond. ii. One year from now, investors has realized the bond when YTM has decreased to 8% and the reinvestment rate is 10%. What would be the realized compound yield?a. Currently bonds with a similar credit rating and maturity as the firm's outstanding debt are selling to yield 7.01 percent while the borrowing firm's corporate tax rate is 34 percent. b. Common stock for a firm that paid a $1.04 dividend last year. The dividends are expected to grow at a rate of 4.5 percent per year into the foreseeable future. The price of this stock is now $24.62. c. A bond that has a $1,000 par value and a coupon interest rate of 12.3 percent with interest paid semiannually. A new issue would sell for $1,147 per bond and mature in 20 years. The firm's tax rate is 34 percent. d. A preferred stock paying a dividend of 7.6 percent on a $96 par value. If a new issue is offered, the shares would sell for $83.45 per share. Question content area bottom Part 1 a. The after-tax cost of debt debt for the firm is____%
- Doha plc has some surplus funds that it wishes to invest in bonds. The company requires a return of 15% on bonds, and the finance director has asked you to analyse whether it should invest in either of the following bonds that are available:Company A: Expected profit 12% bonds, redeemable at par at the end of two more years, with a current market value of QAR 95 per QAR 100 bondCompany B: Expected profit 8% bonds, redeemable at QAR110 at the end of two more years, with a current market value of QAR 95 per QAR 100 bonda. Calculate the expected value (price) of the two bonds and evaluate if either offer an appropriate return for Doha Plc.b. Critically evaluate what would be the impact on the price of bonds if Doha Plc reduces their required return.c. Critically evaluate and discuss the factors that should be considered by the directors of a company when choosing whether to use debt or equity finance for a new projectd. Recently one director has attended a finance conference, on their…A firm raises capital by selling $18,000 worth of debt with flotation costs equal to 3% of its par value. If the debt matures in 10 years and has an annual coupon interest rate of 10%, what is the bond's YTM? (Round to two decimal places.)A firm is planning on issuing new bonds and equity. The semiannual bonds will have a coupon rate 9% with a maturity of 15 years. The preferred stock pays a dividend of $6. The common stock's current dividend is $2.50 with a growth rate of 7%. The flotation costs on bonds is 5%, 7% on preferred stocks and 10% on common stock. The tax rate is 35%. The current price of the bonds is $975 while the price of the common stock is $53.50 and $55 for the preferred stock. If the growth rate falls to 6%, what is change in the cost of external equity? external equity falls by 8.5% external equity falls by 7% external equity falls by 6.5% external equity falls by 6%
- p. A company is offering a 8.4% bond with a current price of $765.40, the yield to maturity equals 8.55%, and the bond has a face value of $1,000. If coupon is paid twice a year, how many years are between now and the maturity of this bond? q. The YTM on a taxable bond is 7% and the YTM of a comparable municipal bond is 4%. Calculate the tax rate that will make investors indifferent between investing in either of the two bonds. r. Samantha's Cleaning Company stock currently costs $42.50 per share, considering a required rate of return of 9.5%. Project the next annual dividend, considering you know that the dividend growth rate is 5% indefinitely."Heart Limited has one bond in issue expiring in eight years, paying 0 coupon and has a face value of $1000. It is currently traded at $720, Beta =1.2, risk free rate is 2%, historic market risk premium is 5.5%. Assume the ratio of debt to equity is 2:1, and corporate tax rate is 20%." (c) Determine the WACC for Heart Limited.Housing and Development Board (HDB) Ltd also currently sells corporate bonds to investors for$1,120. The coupon rate is 15 percent and par value of $1,000. Interest is payable annually, andmaturity period is for 10 years. To provide income stability, you want to find out the following: i. Current Yield ii. Yield to maturity iii. Explain the relationship that exists between the coupon interest rate and yield to maturity and par value and market value of a bond
- CG Forest and Paper LTD. raises capital; by selling 5,000,000 worth of debt with flotation xost equal to 3% of its par value. If the debt matures in 15 years and has coupon rate of 6% (paid annually).What is the bond's YTMSubject: Financial Accountinga. A bond that has $1,000 par value (face value) and a contract or coupon interest rate of 9 percent. A new issue would have a floatation cost of 9 percent of the $1,125 market value. The bonds mature in 5 years. The firm's average tax rate is 30 percent and its marginal tax rate is 25 percent. b. A new common stock issue that paid a $1.20 dividend last year. The par value of the stock is $15, and earnings per share have grown at a rate of 9 percent per year. This growth rate is expected to continue into the foreseeable future. The company maintains a constant dividend-earnings ratio of 30 percent. The price of this stock is now $29, but 8 percent flotation costs are anticipated. c. Internal common equity when the current market price of the common stock is $43. The expected dividend this coming year should be $3.00, increasing thereafter at an annual growth rate of 8 percent. The corporation's tax rate is 25 percent. d. A preferred stock paying a dividend of 9 percent on a $110 par…The outstanding debt of Berstin Corp. has ten years to maturity, a current yield of 6%, and a price of $80. What is the pretax cost of debt if the tax rate is 30%. Note: The current yield of a bond is its annual coupon divided by its price. A. 4.65% B. 6% OC. 6.2% OD. 7.75%