number of outstanding shares100 000Earnings300 000Retention ratio60%91-day Treasury bill rate6%Market risk premium8%UFSK Beta1.2Dividend growth rate stable phase5%Bonds outstanding5 000Par value per bond1000Semi-annual coupon rate on bonds6%Bond yield to maturity8%Bond years remaining to maturity4Corporate tax rate30%Additional informationUFSK limited recently paid a dividendUFSK recently signed a deal and expects a super normal growth in earnings. The company expects earnings to grow by 8% for the first two years then decline by 2% in the following year, there after a stable growth of 5% is expected into the future.Required:Determine the total value of the company’s debt

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
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number of outstanding shares

100 000

Earnings

300 000

Retention ratio

60%

91-day Treasury bill rate

6%

Market risk premium

8%

UFSK Beta

1.2

Dividend growth rate stable phase

5%

Bonds outstanding

5 000

Par value per bond

1000

Semi-annual coupon rate on bonds

6%

Bond yield to maturity

8%

Bond years remaining to maturity

4

Corporate tax rate

30%

Additional information

UFSK limited recently paid a dividend
UFSK recently signed a deal and expects a super normal growth in earnings. The company expects earnings to grow by 8% for the first two years then decline by 2% in the following year, there after a stable growth of 5% is expected into the future.
Required:
Determine the total value of the company’s debt

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