Premium Winery (PW) considers buying a new facility that will cost $2,000,000. This facility is expected...

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Premium Winery (PW) considers buying a new facility that will cost $2,000,000. This facility is expected to last for 5 years. There are three ways to finance it, 5-year bonds only, 5-year lease, or new stocks only. Do NOT include dollar signs ($), percent signs (%), or decimal points. Round to whole numbers. Question 11 (3 points)✓ Saved If PW wants to issue 5-year bonds (notes) with a par value $1,000, coupon rate 10% with annual coupon payment. However, the market rate of return of similar assets is 12%. Can PW sell these bonds at par (hint, find its intrinsic present value)? If yes, explain? If no, how much can PW sell? $927.88 yes they should sell on par value because the present value is less than par value. How many shares of bonds does PW need to issue in order to raise the amount it needs? A If the market perceives new risks of PW because of increase in import depressing the wine price, and PW can only sell these bonds at $800, what is the expected yield-to-maturity? For the second way, the seller of the facility offers a leasing agreement for 5 years 10 semi-annual payments of $284,755 each. What is the equivalent annual rate to equate the present value to this annuity payment? For the second way, the seller of the facility offers a leasing agreement for 5 years 10 semi-annual payments of $284,755 each. What is the equivalent annual rate to equate the present value to this annuity payment? For the third way, PW Its tax rate is 40% , PW's existing stocks paid last dividend of $2, and expected to have a constant growth of 5%. The stock is currently traded for $16. What is the rate of return the market expects from PW's stock? How many new shares of stocks does PW have to issue now? A/ Premium Winery (PW) considers buying a new facility that will cost $2,000,000. This facility is expected to last for 5 years. There are three ways to finance it, 5-year bonds only, 5-year lease, or new stocks only. Do NOT include dollar signs ($), percent signs (%), or decimal points. Round to whole numbers. Question 11 (3 points)✓ Saved If PW wants to issue 5-year bonds (notes) with a par value $1,000, coupon rate 10% with annual coupon payment. However, the market rate of return of similar assets is 12%. Can PW sell these bonds at par (hint, find its intrinsic present value)? If yes, explain? If no, how much can PW sell? $927.88 yes they should sell on par value because the present value is less than par value. How many shares of bonds does PW need to issue in order to raise the amount it needs? A If the market perceives new risks of PW because of increase in import depressing the wine price, and PW can only sell these bonds at $800, what is the expected yield-to-maturity? For the second way, the seller of the facility offers a leasing agreement for 5 years 10 semi-annual payments of $284,755 each. What is the equivalent annual rate to equate the present value to this annuity payment? For the second way, the seller of the facility offers a leasing agreement for 5 years 10 semi-annual payments of $284,755 each. What is the equivalent annual rate to equate the present value to this annuity payment? For the third way, PW Its tax rate is 40% , PW's existing stocks paid last dividend of $2, and expected to have a constant growth of 5%. The stock is currently traded for $16. What is the rate of return the market expects from PW's stock? How many new shares of stocks does PW have to issue now? A/

Answer rating: 100% (QA)

1 If PW wants to issue 5year bonds notes with a par value 1000 coupon rate 10 with annual coupon payment However the market rate of return of similar assets is 12 Can PW sell these bonds at par hint f... View the full answer