Question: ABC Inc. ( ' ABC ) has the following capital structure with the following weights: Common Shares 6 0 % Preferred Shares 3

ABC Inc. ("'ABC") has the following capital structure with the following weights:

Common Shares 60%

Preferred Shares 30%

Bond 10%

* Total 100%

The Total Book Value of the capital structure is $5,000.00.

The common shares have generally paid a Dividend of $2.50/share.

The Bond will mature in six (6) years. The preferred shares have a fixed Dividend rate of $4.50/share. There are currently three (3) preferred shareholders of ABC.

The Bondholder receives $45.00 in interest on June 30 and December 31 each year, The Total Market Value of the capital structure is $10,000.00. As a sophisticated investor, you have a 14% Required Rate of Return.

ABC was incorporated in 2016 under the Canada Business Corporations Act, and is currently authorized to carry on business in every Province in Canada. 70% of ABC's business is carried on in Atlantic Canada.

Required: How much would you pay for the Bond of ABC?

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