Question: You are working on a project that requires a total capital of 3900000. The treasury bonds are yielding currently 0.11%, marking the risk free rate.
You are working on a project that requires a total capital of 3900000. The treasury bonds are yielding currently 0.11%, marking the risk free rate. The IBEX/35 has returned 9% last year, marking the market return. And a suitable beta for project is estimated to be equivalent to tesla 2.75 marking the risk as volatility. You have decided to use a combined strategy to rsie this required capital: 1. short term zero-coupon bonds for 20% of this required capital: bonds would have 15 months maturity and face value of 500000. 2. Long-term corporate bonds for 20% of this required capital: 4 year maturity, quarterly coupon rate 4% face value 600. a) Bank loan for 10% over required capital: montlhy installments along 4 years, bank nominal rate 12%. Use the frencg system (constant and equal installments. What will be the outstanding debts after 2 years? 3. aND THE REST OF ALL REQUIRED CAPITAL WOULD BE RAISED USING SHARES ISSUANCE UNDER repo AGGREMENT. nO DIVIDENDS ALONG WITH 1 AND 2 YEARS AND FROM 3rd year on, dividends would be semi-annual, 0.65 until year 5, over which investors would have the option( right but no obligation) to re-sell their shares @ 4.50 per share. calculate the total amount of debt which needs to be re-paid and how many shares the company needs to issue in t=0 to satisfy the capital requirements.
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