CASE STUDY 4 Pearl Inc. plans to announce the issuance of RM2 million bonds which have...
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CASE STUDY 4 Pearl Inc. plans to announce the issuance of RM2 million bonds which have 6 percent yield. The firm is currently unlevered. The value of the firm's equity is RM10 million with 0.5 million shares outstanding. The firm also plans to hold up to a new capital structure after the issuance of the bonds indefinitely. The expected annual pre-tax earnings of the firm are RM1.5 million. The firm is obligated to the 40% tax bracket. You are required to determine: i) The firm's current overall required return ii) The value of the firm after announcement iii) The firm's cost of equity after announcement iv) The firm's weighted average cost of capital after announcement CASE STUDY 4 Pearl Inc. plans to announce the issuance of RM2 million bonds which have 6 percent yield. The firm is currently unlevered. The value of the firm's equity is RM10 million with 0.5 million shares outstanding. The firm also plans to hold up to a new capital structure after the issuance of the bonds indefinitely. The expected annual pre-tax earnings of the firm are RM1.5 million. The firm is obligated to the 40% tax bracket. You are required to determine: i) The firm's current overall required return ii) The value of the firm after announcement iii) The firm's cost of equity after announcement iv) The firm's weighted average cost of capital after announcement
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i After tax return 1500000 140 900000 Current overall return 9000001000... View the full answer
Related Book For
Cornerstones of Managerial Accounting
ISBN: 978-0324660135
3rd Edition
Authors: Mowen, Hansen, Heitger
Posted Date:
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