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Question 4 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: a. Calculate the current price of the corporate bond for the TestraQ Group? ANSWER a):

Question 4 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: a. Calculate the current price of the corporate bond for the TestraQ Group? ANSWER a):

Fundamentals of Financial Management, Concise Edition (MindTap Course List)
Fundamentals of Financial Management, Concise Edition (MindTap Course List)
9th Edition
ISBN:9781305635937
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter13: Capital Structure And Leverage
Section: Chapter Questions
Problem 11P: RECAPITALIZATION Currently, Forever flowers Inc. has a capital structure consisting of 25% debt and...
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Question 4 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: a. Calculate the current price of the corporate bond for the TestraQ Group? ANSWER a):
Transcribed Image Text:Question 4 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: a. Calculate the current price of the corporate bond for the TestraQ Group? ANSWER a):
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