Huxley Horticulture Ltd has $200,000 (face value) of 10-year bonds outstanding. Each $1,000 bond carries a 5%
Question:
Huxley Horticulture Ltd has $200,000 (face value) of 10-year bonds outstanding. Each $1,000 bond carries a 5% coupon, paid semi-annually, and is currently selling in the market for $950. They also have 100,000 common shares outstanding. The shares just paid a dividend of $2.50. The current yield on Treasury Bills is 2% and the return on the market 10%. Field Farms has a Beta = 2, an ROE = 14%, a tax rate = 30% and a payout ratio = 60%.
What is the cost of debt for Huxley Horticulture?
6.55%
4.77%
5.66%
7.44%
5.00%
What is the market value of Huxley Horticulture's debt?
$230,000
$210,000
$190,000
$200,000
$220,000
What is the required return on Huxley Horticulture's equity, computed using the CAPM?
19%
17%
16%
18%
15%
What growth rate does Huxley Horticulture expect, using the formula g = ROE x Plowback
4.6%
6.6%
5.6%
6.0%
7.0%
Fundamentals of Corporate Finance
ISBN: 978-0077861704
11th edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan