Question 4 The following information is available for the capital structure of TestraQ Group: Debt: $3,500,000 par value of outstanding corporate bonds that pay a semi-annual 11.5% coupon rate with an annual before-tax yield to maturity of 10%. The bond issue has a face value of $1,000 and will mature in 30 years. Ordinary shares: 75,000 outstanding ordinary shares which just paid a $4.50 dividend per share in the current financial year. The firm is maintaining 9% annual growth rate in dividends, which is expected to continue indefinitely. Prefered share: 42 000 preference shares with a 13% fixed dividend rate, face value of $100, market price of $123. Required: Complete the following tasks: a. Calculate the current price of the corporate bond for the TestraQ Group? ANSWER a):
Question 4 The following information is available for the capital structure of TestraQ Group: Debt: $3,500,000 par value of outstanding corporate bonds that pay a semi-annual 11.5% coupon rate with an annual before-tax yield to maturity of 10%. The bond issue has a face value of $1,000 and will mature in 30 years. Ordinary shares: 75,000 outstanding ordinary shares which just paid a $4.50 dividend per share in the current financial year. The firm is maintaining 9% annual growth rate in dividends, which is expected to continue indefinitely. Prefered share: 42 000 preference shares with a 13% fixed dividend rate, face value of $100, market price of $123. Required: Complete the following tasks: a. Calculate the current price of the corporate bond for the TestraQ Group? ANSWER a):
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Question 4
The following information is available for the capital structure of TestraQ Group:
Debt: $3,500,000 par value of outstanding corporate bonds that pay a semi-annual 11.5%
coupon rate with an annual before-tax yield to maturity of 10%. The bond issue has a face value
of $1,000 and will mature in 30 years.
Ordinary shares: 75,000 outstanding ordinary shares which just paid a $4.50 dividend per share
in the current financial year. The firm is maintaining 9% annual growth rate in dividends, which is
expected to continue indefinitely.
Prefered share: 42 000 preference shares with a 13% fixed dividend rate, face value of $100,
market price of $123.
Required: Complete the following tasks:
a. Calculate the current price of the corporate bond for the TestraQ Group?
ANSWER a):
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