Reference no: EM132789464

Integrated case

Q1. Merlion international is an all equity company. With changing market conditions, it intends to restructure its balance sheet. With this idea, it wants to issue corporate bonds and use some of its proceeds to buy back shares from the market. the company wants to issue non callable bonds that promises to pay its subscribers 4.5 percent bi-annual coupon with 15 years of maturity. The required rate of return on the bond, which is also the bond's discount rate is 6.8 percent. The company intends to issue the bonds at ongoing market price and not at its face value. The face value of the bonds can be assumed to be $1000 per bond and the company intends to issue 10,000 such bonds.

Q2. Merlion international is an all equity company. With changing market conditions, it intends to restructure its balance sheet. With this idea, it wants to issue corporate bonds and use some of its proceeds to buy back shares from the market. the company wants to issue non callable bonds that promises to pay its subscribers 4.5 percent bi-annual coupon with 15 years of maturity. The required rate of return on the bond, which is also the bond's discount rate is 6.8 percent. The company intends to issue the bonds at ongoing market price and not at its face value. The face value of the bonds can be assumed to be $1000 per bond and the company intends to issue 10,000 such bonds.

Q3. You are one of the share holders of the company and decide to grab the company's buyback plan. You are currently holding 7,943 shares of the company and want to sell off the entire holdings to the company. After having sold the entire holding, you plan to invest the amount at an investment avenue that promises an annual return of 7.5%. The plan would allow you to withdraw $35,000 at the end of each year, starting at the end of this year. What is the maximum number of whole payments you can withdraw before the account is exhausted; (Hint: Round down to the nearest one decimal value.