Calculate the current market value of the ordinary share of the TestraQ Group if the average return of the shares in the same industry is 13.5%? Calculate the current market value (rounded off to the nearest whole number) and capital structure of the TestraQ Group (rounded off to two decimal places).
Q: For a call option of CN¥100,000 with the $0.16 exercise price and $0.0005 premium, When the spot…
A: Call option Call option provided the right to its holder to buy the underlying security at the…
Q: What is the payback period (in annual terms) of the following cashflow stream?
A: Payback Period: It refers to the period in which the initial cost of investment or project is…
Q: How much was the amount of the original loan? Regular Payment Rate of Compound Interest per Year…
A: Regular Payment amount is $1575 payable semi annually Rate of interest is 5.4% compounded…
Q: How much would be in your savings account in 7 years after depositing $350 today if the bank pays 10…
A: To calculate the future value we will use the below formula Future value = P*(1+r)t Where P -…
Q: The following data available for Delicious Catering Ltd. Account Beginning balance Ending…
A: Sources of Cash means generating cash through various mode By increasing the share capital we can…
Q: A cookie factory needs a new cookie machine. They have narrowed their choices to the following…
A: Incremental IRR: To calculate the profitability of an investment, use the incremental IRR tool.The…
Q: Compute the NPV statistic for Project Y if the appropriate cost of capital is 12 percent. (Negative…
A: Net Present Value (NPV) is one of the important tools used for determining whether a project should…
Q: Southern Pole is developing a special vehicle for Antarctic exploration. The development requires…
A: Solution:- Net Present value (NPV) means the net value in today’s terms after adjusting present…
Q: For a call option of CN¥100,000 with the $0.16 exercise price and $0.0005 premium, When the spot…
A: A call option is a contractual agreement that gives the option buyer the right but not the…
Q: % and the projects have the following investments and cash flow. Project A 100,000.00 40,000.00…
A: Net present value is the difference between the present value of cash flow and initial investment in…
Q: Jack borrowed $4239 at 7.8% to buy a used car. He paid the maturity value of $5460. Find the time of…
A: The question is related calculation of Duration or time. Simple Interest = Principal × Rate × Time
Q: A small northern California consulting firm wants to start a recapitalization pool for replacement…
A: Time value of money (TVM) refers to the method or technique which is used to measure the amount of…
Q: Compute for the: 1.Equity value 2. Firm value
A: Dividend discount model refers to a stock valuation model which is used by the company for…
Q: Calculate net income (after tax) to the net sales.
A: The question is related to the Ratio Analysis. The Net Income (after tax) to Net Sales is the Net…
Q: 3. Compute for the following: Required: Payback period, payback reciprocal, accounting rate of…
A: The question is related to Capital Budgeting. 1. Payback Period is the length of time required to…
Q: Suppose that the relevant equilibrium model is the CAPM with unlimited borrowing and lending at a…
A: a) Security Market Line (SML) is the graphical representation of the Capital Asset Pricing Model…
Q: Shelly’s variable annuity has a mortality and expense risk charge at an annual rate of 2.25 percent…
A: The following information has been provided in the question: Value of account=$90,000 Fee Rate=2.25%
Q: The risk-free rate is currently 8.1%. Use the data in the accompanying table for the Fio family’s…
A: Treynor's measure It measures the additional reward in terms of rate of return for per unit of risk.…
Q: A vehicle was purchased for Rs. 30,000 its life was estimated as twelve years and the scrap value as…
A: Solution:- Depreciation means the fall in the value of the asset due to its usage. As per Reducing…
Q: PLEASE DO THIS COMPLETELY AND TYPEWRITTEN. I WILL UPVOTE. ELABORATE ON THE ANSWERS. SKIP THIS IF YOU…
A: The Net Present Value is calculated with the help of following formula Net Present Value = Present…
Q: be deposited in an account
A: Present value refers to the current value of the future stream of payment on the basis of interest…
Q: What is the CW, when = 10% per year of $1,500 per year, starting in year one and continuing forever…
A: Time value of money (TVM) refers to the method or technique which is used to measure the amount of…
Q: Bottleneck Industries is considering project A. The project has expected cash flows of -$29,500.00…
A: NPV is net present value. It is the sum of present value of all future cash flows of a project.
Q: and 5 months, find the amount due? 4. Find the nominal rate if Php 25,000 is compounded continuously…
A: Future value of amount include the amount deposited and interest accumulated over the period of…
Q: E3-18 (Static) Analyzing the Effects of Transactions Using T-Accounts and Interpreting the Net…
A: Answer - Net Profit Margin - = Net Profit ⁄ Total revenue x 100 Net profit is calculated by…
Q: 3. Compute for the following: Required: Payback period, payback reciprocal, accounting rate of…
A: Net present value (NPV) of an alternative/project refers to the variance between the initial…
Q: Fitzgerald's 30-year bonds pay 7 percent interest annually on a $1,000 par value. If the bonds…
A: Here, To Find: Part a. Yield to maturity of annual bond =? Part b. Yield to maturity of semiannual…
Q: The total stock ROI (return of investment) is defined to be the sum of appreciation in price and…
A: Dividends are the part or share of profits being distributed to investors in form of returns. Also,…
Q: Company makes payments of $1,800 at the end of every month, how long will it take to settle the…
A: Mortgage: It represents the loan or credit taken by the borrower for the purpose of purchasing a…
Q: Peter is a financial investor who actively buys and sells in the securities market. Peter has a…
A: Given: Year Return 1 13.70% 2 10.50% 3 -11.70% 4 25.50% 5 19.20% Expected return…
Q: (a) The amount of interest included in the February payment (round your answer to the nearest cent).…
A: Loan (mortgage) amortization schedule refers to a schedule which is prepared to shows the periodic…
Q: A loan of $21,238 was repaid at the end of 10 months. What size repayment check (principal and…
A: Interest is the amount charged for amount of of loan borrowed. Interest is also received on the…
Q: Find the present value of the following annuities 800 starting at time 1, decreasing by 50 annually…
A: Annuity is a series of regular payments being made for a specified period. When the payments are at…
Q: Compute the NPV for Project M if the appropriate cost of capital is 9 percent. (Negative amount…
A: Net present value (NPV) of an alternative/project refers to the variance between the initial…
Q: he following: Spot USDBRL = 5.0500 1YR USD Money Market Rates = 1.50%…
A: The interest rate and exchange rates are related to each and changes with changes in the interest…
Q: The boom in IPO activity has been mainly credited to the surge in SPACs (special purpose acquisition…
A: SPACs (special purpose acquisition vehicles) are known as blank check companies and such companies…
Q: 1. A company is evaluating two projects, A and B. The company's cost of capital has been determined…
A: NPV is capital budgeting technique which help in decision making on the basis of future cash inflow…
Q: How much should be deposited in an account that will earn at an annual rate of 9%, compounded…
A: Present value (PV) also termed as current value refers to the sum of all future cash flow (CF) or…
Q: Leon and Heidi decided to invest $2,500 annually for only the first eight years of their marriage.…
A: Amount invested annually “PMT” = $2500 Number of years of investment “n” = 8 Annual rate “r” = 8%…
Q: The total interest she paid on the loan was $118. As a percentage, what was the annual interest rate…
A: As we know that the Formula for Simple Interest = (Principle x Rate x Time) / 100 If the interest is…
Q: Which of the following statements is most correct? Why?* a. If a market is weak-form efficient, this…
A: Efficient market hypothesis is one of the basic theorem used to understand the market movement s and…
Q: A- Jason works Monday to Friday, from 10:00 AM to 6:00 AM, at $18.54/hour, including 30 min unpaid…
A: Solution:- Net pay is the amount of net salary payable to an employee after all the eligible…
Q: A bond's market price is $1,125. It has a $1,000 par value, will mature in 6 years, and has a…
A: Given, Market price of bond is $1125 Face value of bond $1000 Coupon rate is 11%
Q: Jack borrowed $4239 at 7.8% to buy a used car. He paid the maturity value of $5460. Find the times…
A: The question is related calculation of Duration or time. Simple Interest = Principal × Rate ;× Time…
Q: Your options trading strategy involves buying a European put with a strike price of ₺10 for ₺0.50…
A: Strategy: Buying put with strike price 10 for 0.5 Buying call with strike price 25 @0.75 Selling…
Q: An annuity with a minimum APR of 3.4% into which you invest a lump sum of $12,500.
A: Annuity refers to the process in which a series of payments should be made as long-term investments…
Q: Suppose Dassie Bank quoted the exchange rate of Singapore dollar in US$ at $0.60, the pound rate in…
A: Foreign currency exchange rates are rates used for exchange of one currency into another currency.…
Q: Table 1-1 details three different loan repayment plans described below. Each plan repays a $6,000…
A: Loan Amount = $6,000 Time Period = 6 Years Interest Rate = 10%
Q: Assume that the CAPM is a good description of stock price returns. The expected market risk premium…
A: Expected return of a stock Using CAPM, the expected return of a stock is calculated. With market…
Q: Dan invested Php 25,000 in a time deposit account that earns 1.25% simple interest rate for 30 days.…
A: In finance interest can be simple interest or compound interest. Simple interest is that interest…
The following information is available for the capital structure of TestraQ Group:
Debt: $3,500,000 par value of outstanding corporate bonds that pay a semi-annual 11.5% coupon rate with an annual before-tax yield to maturity of 10%. The bond issue has a face value of $1,000 and will mature in 30 years.
Ordinary shares: 75,000 outstanding ordinary shares which just paid a $4.50 dividend per share in the current financial year. The firm is maintaining 9% annual growth rate in dividends, which is expected to continue indefinitely.
Required: Complete the following tasks
- Calculate the current market value of the ordinary share of the TestraQ Group if the average return of the shares in the same industry is 13.5%?
- Calculate the current market value (rounded off to the nearest whole number) and capital structure of the TestraQ Group (rounded off to two decimal places).
Step by step
Solved in 2 steps with 2 images
- The following table gives the current balance sheet for Travellers Inn Inc. (TII), a company that was formed by merging a number of regional motel chains. Travellers Inn (Millions of Dollars) The following facts also apply to TII. (1) The long-term debt consists of 29,412 bonds, each having a 20-year maturity, semiannual payments, a coupon rate of 7.6%, and a face value of 1,000. Currently, these bonds provide investors with a yield to maturity of 11.8%. If new bonds were sold, they would have an 11.8% yield to maturity. (2) TIIs perpetual preferred stock has a 100 par value, pays a quarterly dividend per share of 2, and has a yield to investors of 10%. New perpetual preferred stock would have to provide the same yield to investors, and the company would incur a 3.85% flotation cost to sell it. (3) The company has 3.8 million shares of common stock outstanding, a price per share = P0 = 20, dividend per share = D0 = 1, and earnings per share = EPS0 = 5. The return on equity (ROE) is expected to be 10%. (4) The stock has a beta of 1.6%. The T-bond rate is 6%, and RPM is estimated to be 5%. (5) TIIs financial vice president recently polled some pension fund investment managers who hold TIIs securities regarding what minimum rate of return on TIIs common would make them willing to buy the common rather than TII bonds, given that the bonds yielded 11.8%. The responses suggested a risk premium over TII bonds of 3 percentage points. (6) TII is in the 25% federal-plus-state tax bracket. Assume that you were recently hired by TII as a financial analyst and that your boss, the treasurer, has asked you to estimate the companys WACC under the assumption that no new equity will be issued. Your cost of capital should be appropriate for use in evaluating projects that are in the same risk class as the assets TII now operates. Based on your analysis, answer the following questions. a. What are the current market value weights for debt, preferred stock, and common stock? (Hint: Do your work in dollars, not millions of dollars. When you calculate the market values of debt and preferred stock, be sure to round the market price per bond and the market price per share of preferred to the nearest penny.) b. What is the after-tax cost of debt? c. What is the cost of preferred stock? d. What is the required return on common stock using CAPM? e. Use the retention growth equation to estimate the expected growth rate. Then use the expected growth rate and the dividend growth model to estimate the required return on common stock. f. What is the required return on common stock using the own-bond-yield-plus-judgmental-risk-premium approach? g. Use the required return on stock from the CAPM model, and calculate the WACC.The following information is available for the capital structure of TestraQ Group: Debt: $3,500,000 par value of outstanding corporate bonds that pay a semi-annual 11.5% coupon rate with an annual before-tax yield to maturity of 10%. The bond issue has a face value of $1,000 and will mature in 30 years. Ordinary shares: 75,000 outstanding ordinary shares which just paid a $4.50 dividend per share in the current financial year. The firm is maintaining 9% annual growth rate in dividends, which is expected to continue indefinitely. Prefered share: 42 000 preference shares with a 13% fixed dividend rate, face value of $100, market price of $123. Calculate the current market value of the ordinary share of the TestraQ Group if the average return of the shares in the same industry is 13.5%?The following information is available for the capital structure of TestraQ Group: Debt: $3,500,000 par value of outstanding corporate bonds that pay a semi-annual 11.5% coupon rate with an annual before-tax yield to maturity of 10%. The bond issue has a face value of $1,000 and will mature in 30 years. Ordinary shares: 75,000 outstanding ordinary shares which just paid a $4.50 dividend per share in the current financial year. The firm is maintaining 9% annual growth rate in dividends, which is expected to continue indefinitely. Prefered share: 42 000 preference shares with a 13% fixed dividend rate, face value of $100, market price of $123. Required: Complete the following tasks: Identify the cost of each funding source of TestraQ Group in case the company would like to raise new funds, using CAPM for calculation the cost of ordinary equity, assuming that an unfavourable economic condition post- Covid 19 pandemic has increased the share beta to 1.2, risk-free rate of return…
- Levy's company has the following information about its capital structures: Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for 80 percent of par, the bonds make semi-annual payments Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80 Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently selling for $150 per share Market Information - 6 percent market risk premium and 4 percent risk-free rate. Calculate the following if the company has a tax rate of 36 percent: Total Market Value for the Firm , After-tax cost of Debt, Cost of Equity , Cost of Preferred Stock, Weighted Average Cost of Capital. Please note that the total market value, After-tax cost of Debt, Cost of Equity and Cost of Preferred Stock should all be calculated in dollar value and NOT percentages. do not use excel formulas. show all workingsHiggins Production has the following information about its capital structures: Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for 80 percent of par, the bonds make semi-annual payments Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80 Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently selling for $150 per share Market Information - 6 percent market risk premium and 4 percent risk-free rate. Calculate the following if the company has a tax rate of 36 percent: Total Market Value for the Firm ii. After-tax cost of Debt iii. Cost of Equity iv. Cost of Preferred Stock v. Weighted Average Cost of CapitalHiggins Production has the following information about its capital structures: Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for 80 percent of par, the bonds make semi-annual payments Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80 Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently selling for $150 per share Market Information - 6 percent market risk premium and 4 percent risk-free rate. Calculate the following if the company has a tax rate of 36 percent: Cost of Preferred Stock and Weighted Average Cost of Capital
- Given the following information for Notten Power Co., find the WACC. Assume the company tax rate is 21 percent. Debt: 25,500 bonds with coupon rate of 6 percent. $1,000 par value, 25 years to maturity, selling for 101.5 percent of par. The bonds make semiannual coupon payments. Floatation cost is 5% of current market price. Preferred stock: 25,000 shares of preferred stock outstanding currently pay $5.30 per share dividends, sell for $98 per share with floatation cost of $5. Common stock: 100,000 shares outstanding, selling for $512 per share; the beta is 1.35. Market: 7 percent market risk premium and 4 percent risk-free rate. (Answer in word form please)A company's capital structure consists of: 1.100,000 bonds,each with a face value of $100 paying a wemi-annual coupon of 6% p.a.,and with 5 years to maturity.These bonds are currently trading at a market yield of 5% p.a. 2.1,000,000 ordinary shares currently trading at $20 each. If the company was calculating its weighted average cost of capital(WACC),the proportion of financing provided by bonds is:Consider Huggins Production which has the following information about its capital structures: Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for 80 percent of par, the bonds make semi-annual payments Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80 Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently selling for $150 per share Market Information - 6 percent market risk premium and 4 percent risk-free rate. Required: Calculate the following if the company has a tax rate of 36 percent. 1. Cost of Preferred Stock 2. Weighted Average Cost of Capital
- Given the following information for Watson Power Co., find the WACC. Assume the company’s tax rate is 21%. Debt: 15,000 bonds with a 5.8 percent coupon outstanding, $1,000 par value, 25 years to maturity, selling for 108 percent of par; the bonds make semiannual payments Common Stock: 575,000 shares outstanding, selling for $64 per share; the beta is 1.09. Preferred Stock: 35,000 shares of 2.8 percent preferred stock outstanding, currently selling for $65 per share. Market: 7 percent market risk premium and 3.2 percent risk-free rate. Please complete on excel and show excel formulas!Given the following information for American Energy Co., find the WACC. Assume the company tax rate is 21 percent. Debt: 25,500 bonds with coupon rate of 6 percent. $1,000 par value, 25 years to maturity, selling for 101.5 percent of par. The bonds make semiannual coupon payments. Floatation cost is 5% of current market price. Preferred stock: 25,000 shares of preferred stock outstanding currently pay $5.30 per share dividends, sell for $98 per share with floatation cost of $5. Common stock: 100,000 shares outstanding, selling for $512 per share; the beta is 1.35. Market: 7 percent market risk premium and 4 percent risk-free rate.Market Basket, Inc., has 125,000 shares of common stock outstanding at a price of $43 a share. They also have 25,000 shares of preferred stock outstanding at a price of $55 a share. There are 10,000, 8 percent bonds outstanding that are priced at $990. The bonds mature in 16 years and pay interest semiannually. What is the capital structure weight of the preferredstock?