1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Viefleur [7K]
3 years ago
10

Cotton On Ltd. currently has the following capital structure: Debt: $3,500,000 par value of outstanding bond that pays annually

10% coupon rate with an annual before-tax yield to maturity of 12%. The bond issue has face value of $1,000 and will mature in 20 years. Ordinary shares: $5,500,000 book value of outstanding ordinary shares. Nominal value of each share is $100. The firm plan just paid a $8.50 dividend per share. The firm is maintaining 4% annual growth rate in dividends, which is expected to continue indefinitely. Preferred shares: 45,000 outstanding preferred shares with face value of $100, paying fixed dividend rate of 12%. The firm's marginal tax rate is 30%. Required: a) Calculate the current price of the corporate bond? (4 marks) b) Calculate the current price of the ordinary share if the average return of the shares in the same industry is 9%? (3 marks) c) Calculate the current price of the preferred share if the average return of the shares in the same industry is 10% (3 marks)
Mathematics
1 answer:
vladimir1956 [14]3 years ago
6 0

Answer:

a) Calculate the current price of the corporate bond? (4 marks)

  • $818,18

b) Calculate the current price of the ordinary share if the average return of the shares in the same industry is 9%? (3 marks)

  • $176.80

c) Calculate the current price of the preferred share if the average return of the shares in the same industry is 10% (3 marks)

  • $120

Step-by-step explanation:

total debt = $3,500,000 par value 10$ coupon with a YTM of 12%

YTM = [coupon + (F - P)/n] / [(F + P)/2]

0.12 = [100 + (1,000 - P)/20] / [(1,000 + P)/2]

0.12(500 + 0.5P) = 100 + 50 - 0.05P

60 + 0.06P = 150 - 0.05P

0.11P = 90

P = 90/0.11 = $818.18

total debt = $818.18 x 3,500

stock price:

Div₀ = $8.50

Div₁ = $8.50 x 104% = $8.84

g = 4%

rrr = 9%

using the perpetuity growth model:

stock price = $8.84 / (9% - 4%) = $8.84 / 5% = $176.80

preferred stock:

Div = $12

rrr = 10%

using the perpetuity formula:

preferred stock = $12 / 10% = $120

You might be interested in
Move values into the boxes to create an equation that represents "8 times h 24."
Aloiza [94]

Answer:

0+8

Step-by-step explanation:

add 8 each time

it is 0 because in times table if you have 8, 16 and 24 then you don't need to add it on or take away from it, so it will be 0.

I hope that helped.

7 0
2 years ago
A system of equations is shown below.
prisoha [69]

Given:

The system of equations is

y=1.5x-3

y=1.5x+4

To find:

The true statement about the given system of equations.

Solution:

The slope intercept form of a line is

y=mx+b

Where, m is the slope and b is the y-intercept.

We have,

y=1.5x-3

y=1.5x+4

On comparing these two lines with slope intercept form, we get

m_1=1.5,b_1=-3

m_2=1.5,b_2=4

Since the slopes of the lines are equal but the y-intercepts are different, therefore, the two lines are parallel and the system has no solution.

Therefore, the correct option is A.

5 0
3 years ago
CNNBC recently reported that the mean annual cost of auto insurance is 965 dollars. Assume the standard deviation is 113 dollars
velikii [3]

Answer:

P(939.6 < X < 972.5) = 0.6469

Step-by-step explanation:

To solve this question, we need to understand the normal probability distribution and the central limit theorem.

Normal Probability Distribution:

Problems of normal distributions can be solved using the z-score formula.

In a set with mean \mu and standard deviation \sigma, the zscore of a measure X is given by:

Z = \frac{X - \mu}{\sigma}

The Z-score measures how many standard deviations the measure is from the mean. After finding the Z-score, we look at the z-score table and find the p-value associated with this z-score. This p-value is the probability that the value of the measure is smaller than X, that is, the percentile of X. Subtracting 1 by the pvalue, we get the probability that the value of the measure is greater than X.

Central Limit Theorem

The Central Limit Theorem estabilishes that, for a normally distributed random variable X, with mean \mu and standard deviation \sigma, the sampling distribution of the sample means with size n can be approximated to a normal distribution with mean \mu and standard deviation s = \frac{\sigma}{\sqrt{n}}.

For a skewed variable, the Central Limit Theorem can also be applied, as long as n is at least 30.

CNNBC recently reported that the mean annual cost of auto insurance is 965 dollars. Assume the standard deviation is 113 dollars.

This means that \mu = 965, \sigma = 113

Sample of 57:

This means that n = 57, s = \frac{113}{\sqrt{57}} = 14.97

Find the probability that a single randomly selected policy has a mean value between 939.6 and 972.5 dollars.

This is the pvalue of Z when X = 972.5 subtracted by the pvalue of Z when X = 939.6. So

X = 972.5

Z = \frac{X - \mu}{\sigma}

By the Central Limit Theorem

Z = \frac{X - \mu}{s}

Z = \frac{972.5 - 965}{14.97}

Z = 0.5

Z = 0.5 has a pvalue of 0.6915

X = 939.6

Z = \frac{X - \mu}{s}

Z = \frac{939.6 - 965}{14.97}

Z = -1.7

Z = -1.7 has a pvalue of 0.0446

0.6915 - 0.0446 = 0.6469

So

P(939.6 < X < 972.5) = 0.6469

3 0
2 years ago
RT is a midsegment of triangle UQS.
kvasek [131]

245 because it has rt and then number s one
4 0
2 years ago
50 Points!!
charle [14.2K]

1. 2\cdot(8-3)-6=2\cdot5-6=4

2. 14c-6=22\implies14c=28\implies c=2

3. 2x+18=5x\implies 3x=18\implies x=6

4. 18-c+9c+6=24+8c

5. 8x=-56\implies x=-7

Hope this helps :)

3 0
2 years ago
Other questions:
  • Find the equation, in standard form, of the line passing through the points (3,-4) and (5,1)
    9·1 answer
  • Does this polynomial have a GCF greater than 1?
    7·1 answer
  • Figure A is a scale image of Figure B.What is the value of x?<br> figure A 10,x<br> figure B 25,10
    6·2 answers
  • To solve this system using the addition method, you would need to multiply the first equation by what number in order for the x'
    6·1 answer
  • HELP ME! thank youu!
    13·1 answer
  • Which measurements could NOT represent the side lengths of a right triangle? A. 12 in, 35 in, 37 in B. 10 in, 24 in, 26 in C. 4
    5·2 answers
  • A school is arranging a field trip to the zoo. The school spends 757 Point $76 on passes for 34 students and three teachers. The
    7·1 answer
  • What is 15/3 equal to
    13·1 answer
  • Three numbers A,B,C are in ratio of 2:3:5. If B=4.20, find A and C.<br><br><br><br> Plz help
    12·1 answer
  • What is 453,605 rounded to the nearest thousand
    9·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!