SantiZerLtd currently has $200 million of market value debt outstanding. The 9 per cent coupon bonds (semi-annual pay) have a maturity of 15 years, a face value of $1000 and are currently priced at $1,024.87 per bond. The company also has an issue of 2 million preference shares outstanding with a market price of $20. The preference shares offer an annual dividend of $1.20. Santi Zer also has 14 million ordinary shares outstanding with a price of $20.00 per share. The company is expected to pay a $2.20 ordinary dividend 1 year from today, and that dividend is expected to increase by 7 per cent per year forever. If the corporate tax rate is 40 per cent, then what is the company’s weighted average cost of capital?
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
SantiZerLtd currently has $200 million of market value debt outstanding. The 9 per cent coupon bonds (semi-annual pay) have a maturity of 15 years, a face value of $1000 and are currently priced at $1,024.87 per bond. The company also has an issue of 2 million
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 9 images
