Christiania Investments has a project to develop next year, for which they will require 4.200.000,00 They...
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Christiania Investments has a project to develop next year, for which they will require 4.200.000,00€ They are planning to obtain this required capital using a diversified strategy: Issuing ZCB, CB, shares issuance under REPO Agreement and a Bank Loan. The plan is getting today's capital equally proportioned from each strategy: *ZCB with Face Value 500€ and a 18 months maturity. *Coupon Bonds with Face Value 1.000,00€, and 12 years maturity. Quarterly coupon rate 2%. *Issuance of shares (under REPO Agreement), semi-annual dividends, as follows: During year 1 and year 2 no dividends. Year 3, 0.60€ dividend Year 4, 0.70€ dividend Year 5, 0.80€ dividend And on year 5, a repurchasing option, for 8,00€ / share The CFO in Christiania is aware that investors will claim a Required Rate (Ri) based on Perceived risk as volatility (Beta) which is 10% superior that Ford Motors Beta, currently at 1,34 German Bundes Bonds are returning 0,75% (Rf) Stock market expected return for next year is set at 9% (Rm) *Christiania CFO will also borrow from La Caixa, a bank loan 3 years maturity and equal and consecutive monthly installments. La Caixa will charge 9% nominal rate on this loan. How much debt should be issued initially for all combined strategies What would be Bank debt after 4 years? Christiania Investments has a project to develop next year, for which they will require 4.200.000,00€ They are planning to obtain this required capital using a diversified strategy: Issuing ZCB, CB, shares issuance under REPO Agreement and a Bank Loan. The plan is getting today's capital equally proportioned from each strategy: *ZCB with Face Value 500€ and a 18 months maturity. *Coupon Bonds with Face Value 1.000,00€, and 12 years maturity. Quarterly coupon rate 2%. *Issuance of shares (under REPO Agreement), semi-annual dividends, as follows: During year 1 and year 2 no dividends. Year 3, 0.60€ dividend Year 4, 0.70€ dividend Year 5, 0.80€ dividend And on year 5, a repurchasing option, for 8,00€ / share The CFO in Christiania is aware that investors will claim a Required Rate (Ri) based on Perceived risk as volatility (Beta) which is 10% superior that Ford Motors Beta, currently at 1,34 German Bundes Bonds are returning 0,75% (Rf) Stock market expected return for next year is set at 9% (Rm) *Christiania CFO will also borrow from La Caixa, a bank loan 3 years maturity and equal and consecutive monthly installments. La Caixa will charge 9% nominal rate on this loan. How much debt should be issued initially for all combined strategies What would be Bank debt after 4 years?
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Answer rating: 100% (QA)
Answer 1 The initial debt to be issued for all combined strategies should be 420000000 This amount will be divided into different financial instrument... View the full answer
Related Book For
Horngrens Accounting
ISBN: 978-0133855371
10th Canadian edition Volume 1
Authors: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura, Carol A. Meissner, Jo-Ann L. Johnston, Peter R. Norwood
Posted Date:
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