You are given the following information concerning Parrothead Enterprises: Debt: 7,000 7.5 percent coupon bonds outstanding, with

Question:

You are given the following information concerning Parrothead Enterprises:

Debt: 7,000 7.5 percent coupon bonds outstanding, with 20 years to maturity, and quoted price of 108. These bonds make semiannual payments.

Common stock: 180,000 shares outstanding, selling for $60 per share. The stock has a beta of 0.90 and will pay a dividend of $2.80 next year. The dividend is expected to grow by 6 percent per year indefinitely.

Preferred stock: 8,000 shares of 5.5 percent preferred stock selling at $94 per share.

Market: A 12 percent expected return, a 5 percent risk-free rate, and 35 percent tax rate.

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...