Adler Petroleum has the following capital structure: Bonds $ 1,500,000 Preferred shares 3,000,000 Common shares 3,000,000 Retained earnings 4,000,000 $ 11,500,000 The existing bonds have a coupon rate of 14 percent with 25 years left to maturity, but new 25 year bonds to be sold at par ($1,000) will have an annual yield rate of 10 percent. After tax flotation costs of 4 percent would be expected on the new issue. Please use annual analysis. The existing preferred shares have a $40 face value and an annual dividend rate of 12 percent. New preferred shares having a $60 face value could be sold at a $58.50 with an 9.5 percent dividend rate. Flotation costs would be 3 percent after tax. Outstanding common shares were originally sold for $2 per share. The market price is currently at $5 per share and they have a dividend of $0.20 D0. They have growth rate of 10%. New shares would be issued at 5 percent discount from the current market price of $5.00 and would require after-tax flotation expense of 6 percent. Adler’s tax rate is 25 percent and would require the sale of new common shares to fund new investments. What is the value of Kd? Round to 2 decimal places. What is the market value of the Bonds? Round to the nearest dollar. No commas. What is the value of Kp? Round to 2 decimal places. What is market value of the preferred shares? Round to the nearest dollar. No commas. What is the value of Kn? Round to 2 decimal places. What is the market value of the common shares? Round to the nearest dollar. No commas.
Adler Petroleum has the following capital structure:
|
Bonds |
$ |
1,500,000 |
|
|
|
3,000,000 |
|
Common shares |
|
3,000,000 |
|
|
|
4,000,000 |
|
|
$ |
11,500,000 |
The existing bonds have a coupon rate of 14 percent with 25 years left to maturity, but new 25 year bonds to be sold at par ($1,000) will have an annual yield rate of 10 percent. After tax flotation costs of 4 percent would be expected on the new issue. Please use annual analysis.
The existing preferred shares have a $40 face value and an annual
Outstanding common shares were originally sold for $2 per share. The market price is currently at $5 per share and they have a dividend of $0.20 D0. They have growth rate of 10%. New shares would be issued at 5 percent discount from the current market price of $5.00 and would require after-tax flotation expense of 6 percent.
Adler’s tax rate is 25 percent and would require the sale of new common shares to fund new investments.
What is the value of Kd? Round to 2 decimal places.
What is the market value of the Bonds? Round to the nearest dollar. No commas.
What is the value of Kp? Round to 2 decimal places.
What is market value of the preferred shares? Round to the nearest dollar. No commas.
What is the value of Kn? Round to 2 decimal places.
What is the market value of the common shares? Round to the nearest dollar. No commas.
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