Calculate the value of both quis plc and zanda plc.

Assignment Help Managerial Accounting

Reference no: EM133346902

Case Study: Quis plc and Zanda plc are two companies whose shares are quoted on the London stock exchange. Their assets have the same level of systematic risk. Each company has a constant annual earnings flow (before dividends and interest) of £5 million. This level of earnings is expected to be maintained by both companies in the future. Quis plc. has issued £8 million of 9% irredeemable bonds; each £100 bond is currently quoted at £50. Zanda plc. has no debt. Each of Quis's 17.2 million shares is currently quoted at £1, while Zanda has issued 46.4 million shares each of which has a market price of 50p. Both companies pay out the entire earnings flow each year as dividends and interest. Assume no taxation.

Required:

Calculate the value of both Quis plc and Zanda plc. Is the market in equilibrium?
Calculate the cost of equity and the cost of debt of both companies.

Reference no: EM133346902

Questions Cloud

Describe atkinson and shiffrins concept of control processes : Describe Atkinson and Shiffrin's concept of control processes. Then give two examples of control processes to support your thinking.

Identify where the citric acid cycle takes place in the cell : Identify where the citric acid cycle takes place in the cell. Then, based on where this occurs in the cell, discuss a chronic training adaptation

What hormones are involved in renal functions : What hormones are involved in renal functions, and what 2 systems, ultimately what affects water absorption directly and indirectly?

Comparing the disorders seen in psychology and mental health : If doing research on social anxiety disorders and comparing them to other disorders seen in psychology and mental health.

Calculate the value of both quis plc and zanda plc. : Calculate the value of both Quis plc and Zanda plc. Is the market in equilibrium? Calculate the cost of equity and the cost of debt of both companies.

Elements of effective communication in multicultural context : What are three elements of effective communication in a multicultural context? Give details on these contexts.

How long will you have to wait before you have enough money : You are planning the trip of a lifetime to Australia. You will need $20,000 for the trip, and you currently have $10,000 in the bank. If you can invest

How does skinner replace old cause and effect terminolgy : Why does Skinner say that the terms "cause and effect" are no longer appropriate in science? How does Skinner replace the old "cause and effect" terminology?

What might be the effect of such a drug increase sperm : Imagine a drug that causes an increase in the signaling pathway activated by nitric oxide (NO). What might be the effect of such a drug increase sperm prod

User Account

All Pages