Akita is trying to estimate the value of its business given the following information: Government securities generates a yield of 4.5% Akita, being a relatively mature business was able to determine its credit spread to be at 2.5% for a 3-year maturity instrument and increases by 0.5% for each additional year to maturity Current debt instruments issued by Akita is only a Php1,000,000 debt instrument with a 5 year tenor issued last year carrying a 7% coupon Other than the debt instrument issued, Akita also paid back shareholders at a Php8.00 dividend per share this year based on its Php10.0 earnings per share Book value per share of equity instruments is currently at Php15.00 1. How much is the expected cost of equity assuming that the current price per share is Php75.00? 2. How much is the market value Akita's sole debt instrument? 3. How much is the WACC for Akita assuming that the current price per share is Php75.00 and tax rate at 30%?
Akita is trying to estimate the value of its business given the following information: Government securities generates a yield of 4.5% Akita, being a relatively mature business was able to determine its credit spread to be at 2.5% for a 3-year maturity instrument and increases by 0.5% for each additional year to maturity Current debt instruments issued by Akita is only a Php1,000,000 debt instrument with a 5 year tenor issued last year carrying a 7% coupon Other than the debt instrument issued, Akita also paid back shareholders at a Php8.00 dividend per share this year based on its Php10.0 earnings per share Book value per share of equity instruments is currently at Php15.00 1. How much is the expected cost of equity assuming that the current price per share is Php75.00? 2. How much is the market value Akita's sole debt instrument? 3. How much is the WACC for Akita assuming that the current price per share is Php75.00 and tax rate at 30%?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Akita is trying to estimate the value of its business given the following information:
- Government securities generates a yield of 4.5%
- Akita, being a relatively mature business was able to determine its credit spread to be at 2.5% for a 3-year maturity instrument and increases by 0.5% for each additional year to maturity
- Current debt instruments issued by Akita is only a Php1,000,000 debt instrument with a 5 year tenor issued last year carrying a 7% coupon
- Other than the debt instrument issued, Akita also paid back shareholders at a Php8.00 dividend per share this year based on its Php10.0 earnings per share
- Book value per share of equity instruments is currently at Php15.00
1. How much is the expected
2. How much is the market value Akita's sole debt instrument?
3. How much is the WACC for Akita assuming that the current price per share is Php75.00 and tax rate at 30%?
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