Reference no: EM133073454
Mrs. Linda and Mr. David are finance officers doing bond and stock analysis. PT Hebat Tbk. is planning to issue an eight-year maturity IDR 100,000,000,000 bond with a 12 percent annual coupon rate and paid semi-annually. Suppose that a similar and comparable (all-else equal)competitor of PT Hebat Tbk., namely PT Baik Tbk., has IDR 1,000,000,000,000 eight-year maturity bond with 14 percent annual coupon rate, also paid semi-annually.
a) What is a reasonable estimate the PT Hebat Tbk could expect from the proceeds of issuing its bonds?
b) What happens if PT Hebat Tbk only wants to sell its bond for IDR 95,000,000,000 or above? Explain!
Mrs. Linda and Mr. David are finance officers doing bond and stock analysis. PT Hebat Tbk. isplanning to issue an eight-year maturity IDR 100,000,000,000 bond with a 12 percent annual coupon rate and paid semi-annually. Suppose that a similar and comparable (all-else equal)competitor of PT Hebat Tbk., namely PT Baik Tbk., has IDR 1,000,000,000,000 eight-year maturity bond with 14 percent annual coupon rate, also paid semi-annually.a) What is a reasonable estimate the PT Hebat Tbk could expect from the proceeds of issuing its bonds?
b) What happens if PT Hebat Tbk only wants to sell its bond for IDR 95,000,000,000 or above? Explain!
They also analyze the firm's equity. According to the recent RUPS (Rapat Umum Pemegang Saham), at the beginning of this year, the firm is expected to pay a cash dividend of IDR 8,000 pershare at the end of this year. They consider that the firm will attain a sustainable growth rate of 3 percent per annum forever. They consider that a 10 percent is an appropriate equity discount rate.
c) Estimate the firm's equity value per share now (at the beginning of this year)!
d) Due to the pandemic uncertainties, explain what are reasonable points that they to adjust their equity valuations in part c)? Explain!
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