Long-term liabilities - cost of capital A Kókò has determined its optimal structure which is composed of the following sources and target market val'ue proportions. Source of Capital Target Market Proportions 60% Long-term debt Common stock equity 40 Debt: The Kòkò can sell a 15-year, P1,000 par value, 8 percent bond for P1,050. A flotation cost of 2 percent of the face value would be required in addition to the premium of P50. Common Stock: A Kòkò's common stock is currently selling for P75 per share. The dividend expected to be paid at the end of the coming year is P5. Its dividend payments have been growing at a constant rate for the last five years. Five years ago, the dividend was P3.10. It is expected that to sell, a new coramon stock issue must be underpriced P2 per share and the Kòkò must pay P1 per share in fletation costs. Additionally, the Kòkò has a marginal tax rate of 40 percent.

Long-term liabilities - cost of capital A Kókò has determined its optimal structure which is composed of the following sources and target market val'ue proportions. Source of Capital Target Market Proportions 60% Long-term debt Common stock equity 40 Debt: The Kòkò can sell a 15-year, P1,000 par value, 8 percent bond for P1,050. A flotation cost of 2 percent of the face value would be required in addition to the premium of P50. Common Stock: A Kòkò's common stock is currently selling for P75 per share. The dividend expected to be paid at the end of the coming year is P5. Its dividend payments have been growing at a constant rate for the last five years. Five years ago, the dividend was P3.10. It is expected that to sell, a new coramon stock issue must be underpriced P2 per share and the Kòkò must pay P1 per share in fletation costs. Additionally, the Kòkò has a marginal tax rate of 40 percent.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

1. A 5-year, annual-paying sinking-fund bond is priced at $ 102.66. Assuming intermittent principal payments are immaterial, is it over, under, or fairly valued given the term structure of 1.5%, 1.75%, 2%, 2.25%, 2.5% and coupons of 3.2%, 3%, 2.8%, 2.6%, and 2.4% for the 5 years? A. Over-valued B. Under-valued C. Fairly-valued D. Not enough information
Determine the market price of a 15-year, 4.75%, $200,000 coupon bond when the market interest rate is 5.15%.
Consider a CDO with a total notional of $500 million, consisting of three tranches: Senior (75%), Mezzanine (15%), and Equity (10%). The underlying portfolio has a total expected loss of 6%. a. Calculate the expected losses for each tranche, assuming they follow the standard tranche subordination rules. b. If the actual realized losses are 30%, determine the losses allocated to each tranche. c. Plot a graph that shows how the payoff of the holders to the Mezzanine tranche owners varies with the value of the assets in the mortgage pool at the time of maturity. d. Represent this payoff as a combination of payoffs of options and risk-free debt for Mezzanine tranche. e. Suppose the CDO manager decides to create a fourth tranche, called the Super- Senior tranche, which has the highest priority in the cash flow waterfall. If the Super-Senior tranche is sized at 50% of the total notional, recalculate the expected losses for all tranches. (hint: Super- Senior tranche is created out of Senior…
A firm raises capital by selling $10,000 worth of debt with flotation costs equal to 2% of its par value. If the debt matures in 10 years and has an annual coupon interest rate of 11%, what is the bond's YTM? Question content area bottom Part 1 The bond's YTM is enter your response here%. (Round to two decimal places.)
Yield to maturity (Expected/Current) 9% Number of Years to Future Liability 9.00 Future Liability $7,500 Bond 1 Bond 2 Bond 3 Coupon rate 6.00% 7.000% 8.00% Maturity 12 18 24 Face value 1,000 1,000 1,000 Compute the amount to be invested to meet the future liability noted in the data. This future liability is due in 9 years. Please show work using excel
Subject :- Finance
4) A 10 year bond with $50, 000 face value has semiannual coupon rate 4% and semiannual yield rate 2%. Fill out the following amortization table. Principle Outstanding t Payment Interest герaid Balance 1 2 3 12
What was the Bond Fund's annualized return over the period specified? (Pick the closest answer) Question 1 options: 8% 406 IPO 600 I
Which of the following is most likely classified as a Held-to-Maturity (HTM) debt investment? Which of the following is most likely classified as a Held-to-Maturity (HTM) debt investment? 30% ownership of Yves St. Laurent stock 10-year bond that will be held for 10 years 100% ownership of a supplier's voting stock a 5-year bond that will be sold tomorrow
Calculate the cost of capital for a bond that has a $1,000 par value and a contract or coupon interest rate of 11%. Interest payments are $55 and paid semi-annually. The bond has a current market value of $1,000 and will mature in 20 years. The firm's marginal tax rate is 30% a. 11% b. 10.7% c. 7.7% d. 30%