User Account

All Pages

Calculate the current value of the preferred share

Assignment Help Financial Accounting
Reference no: EM133008608

Question - Treasure Island Ltd. currently has the following capital structure:

Debt: $3,500,000 par value of outstanding non-callable bond that pays annually 10% coupon rate with an annual before-tax yield to maturity of 8.5%. The bond issue has face value of $1,000/bond and will mature in 20 years.

Ordinary shares: 70,000 outstanding ordinary shares. The firm plans to pay a $4.50 dividend per share in the next financial year. The firm is maintaining 5% annual growth rate in dividend, which is expected to continue indefinitely.

Preferred shares: 45 000 outstanding preferred shares with face value of $100, paying fixed dividend rate of 13%.

Company tax rate is 30%.

Required - Complete the following tasks:

A) Calculate the current price of the corporate bond?

B) Calculate the current value of the preferred share if the average return of the shares in the same industry is 10.5%.

C) Compute the weighted average cost of capital (WACC) under the traditional tax system for the firm.

Reference no: EM133008608

Questions Cloud

Create a detailed budget and reports : Develop the budget for the project. As such, you must: - collect and accurately interpret relevant data to develop and finalise a budget
Determine the required return on the preference equity : The preference shares were issued for $18 with a $1.50 dividend. The current market price is $16. Determine the required return on the preference equity
Complete financial and statistical reports : Develop the budget for the project - consult effectively and negotiate outcomes with others on budgetary issues
How much do you need to put in the trust today : You want this amount to increase 3% per year and go on forever. If your trust can earn 6% returns, how much do you need to put in the trust today
Calculate the current value of the preferred share : The firm plans to pay a $4.50 dividend per share in the next financial year. Calculate the current value of the preferred share
Develop the budget for the project : Develop the budget for the project - Consult effectively and negotiate outcomes with others on budgetary issues
Budget development and management : Budget Development and Management - Create a detailed budget and reports to accurately reflect the requirements and impact on the organisation
How social workers can help social workers discover : How social workers can help social workers discover their access to power?
Unadjusted client trial balance reports : The unadjusted client trial balance reports interest expense of $48,138. THE AUDIT YEAR IS 2020 - auditing a client which has an installment loan

Reviews

Write a Review

Financial Accounting Questions & Answers

  What is bellfont production cost per door stopper for sept

Bellfont expects to produce 100,000 door stoppers. Assuming no structural changes, what is Bellfont's production cost per door stopper for September?

  How much revenue should maas recognize in the first year

Maas LLP developed software that helps farmers to plow their fields in a manner that prevents erosion and maximizes the effectiveness of irrigation. Sunny Dale paid a licensing fee of $24,000 for a copy of the software. How much revenue should Maas r..

  What was restated

What was the apparent cause of the overstated asset/understated liability? What were the accounting impacts? What were the other impacts e.g. stock price?

  What described rushing report among long-term liabilities

What amount(s) if any, related to the situations described should Rushing report among long-term liabilities in its balance sheet at December 31, 2021?

  Evaluate the optimum selling price

Evaluate the optimum selling price and identify which customer group is most profitable.

  Prepare Guard Dog bank recofnciliation at December

Question - The cash of Guard Dog Security Systems reported a balance of $2,540 at December 31, 2018. Prepare Guard Dog bank recofnciliation at December

  Uses the average cost method of process costing

Van Pelt Company uses the average cost method of process costing. The production report for the Mixing department follows: What are the equivalent units for

  How price radiation treatment in order to meet accounting

variable cost rate of $500, and an expected volume of 200 patients, how would you price radiation treatment in order to meet the accounting breakeven in Year

  Prepaid expenses decreased-accrued liabilities decreased

Molly's Auto Detailers maintains its records on the cash basis. During 2013, Molly's collected $73,100 from customers and paid $20,000 in expenses. Depreciation expense of $3,600 would have been recorded on the accrual basis. Over the course of the y..

  Are the stocks correctly priced over or under

Are these stocks correctly priced over or under. why? The risk free rate is 7% and the expected return on mrket is 14%. Stock A characterstics are beta of 1.27

  The defender and the challenger

Maria is tired of driving the old used car she bought 2 years ago for $18,000. She estimates it is worth about $8,000 now. A car salesman gave her this deal: "Look, I'll give you $10,000 in trade for this year's model. This is a $2,000 more than you ..

  What conclusions can be drawn based on preceding analyses

What conclusions can be drawn based on the preceding analyses you conducted? That is, what is the bottom-line information you would like to convey to members of the finance committee?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd