Blooming Ltd. currently has the following capital structure:Debt: $2,500,000 par value of outstanding bond that pays annually 12% coupon rate with anannual before-tax yield to maturity of 10%. The bond issue has face value of $1,000 and willmature in 25 years.Ordinary shares: 65,000 outstanding ordinary shares. The firm plans to pay a $7.50 dividend pershare in the next financial year. The firm is maintaining 3% annual growth rate in dividend, whichis expected to continue indefinitely.Preferred shares: 40 000 outstanding preferred shares with face value of $100, paying fixeddividend rate of 14%.Company tax rate is 30%.Required: Complete the following tasks: c) Calculate the current value of the preferred share if the average return of the shares in the same industry is 12%
Blooming Ltd. currently has the following capital structure:Debt: $2,500,000 par value of outstanding bond that pays annually 12% coupon rate with anannual before-tax yield to maturity of 10%. The bond issue has face value of $1,000 and willmature in 25 years.Ordinary shares: 65,000 outstanding ordinary shares. The firm plans to pay a $7.50 dividend pershare in the next financial year. The firm is maintaining 3% annual growth rate in dividend, whichis expected to continue indefinitely.Preferred shares: 40 000 outstanding preferred shares with face value of $100, paying fixeddividend rate of 14%.Company tax rate is 30%.Required: Complete the following tasks: c) Calculate the current value of the preferred share if the average return of the shares in the same industry is 12%
Blooming Ltd. currently has the following capital structure:Debt: $2,500,000 par value of outstanding bond that pays annually 12% coupon rate with anannual before-tax yield to maturity of 10%. The bond issue has face value of $1,000 and willmature in 25 years.Ordinary shares: 65,000 outstanding ordinary shares. The firm plans to pay a $7.50 dividend pershare in the next financial year. The firm is maintaining 3% annual growth rate in dividend, whichis expected to continue indefinitely.Preferred shares: 40 000 outstanding preferred shares with face value of $100, paying fixeddividend rate of 14%.Company tax rate is 30%.Required: Complete the following tasks: c) Calculate the current value of the preferred share if the average return of the shares in the same industry is 12%
Blooming Ltd. currently has the following capital structure: Debt: $2,500,000 par value of outstanding bond that pays annually 12% coupon rate with an annual before-tax yield to maturity of 10%. The bond issue has face value of $1,000 and will mature in 25 years. Ordinary shares: 65,000 outstanding ordinary shares. The firm plans to pay a $7.50 dividend per share in the next financial year. The firm is maintaining 3% annual growth rate in dividend, which is expected to continue indefinitely. Preferred shares: 40 000 outstanding preferred shares with face value of $100, paying fixed dividend rate of 14%. Company tax rate is 30%. Required: Complete the following tasks:
c) Calculate the current value of the preferred share if the average return of the shares in the same industry is 12%
Definition Definition Type of stock which is granted priority over dividend distributions as compared to common stockholders. Preferred stocks also do not carry any voting rights. Notably, in a case where a company is going to be liquidated, preferred stockholders have a priority claim on the value of assets of the company as quoted in the balance sheet, as compared to the common stockholders.
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Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
