Pure Juice Ltd sold bonds to the public five years ago to finance its operation. The bond was recently quoted at 89% of face value. The bond has a total face value of GHC 8.5 million and it's currently priced to yield 9%. Pure Juice Ltd shares currently sell for GHC 14 per share. Fifty-three (53%) of Pure Juice Ltd 3.2 million shares are outstanding. To raise additional capital, Pure Juice Ltd issued 500 preference stock that paid GHC 6.5 annually per share and sold for GHC 95 per share. Treasury bills pay 8% and the expected return on the market is 17%. Financial experts have estimated that Pure Juice Ltd has a beta of 0.92. If the corporate tax rate is 36%.

Pure Juice Ltd sold bonds to the public five years ago to finance its operation. The bond was recently quoted at 89% of face value. The bond has a total face value of GHC 8.5 million and it's currently priced to yield 9%. Pure Juice Ltd shares currently sell for GHC 14 per share. Fifty-three (53%) of Pure Juice Ltd 3.2 million shares are outstanding. To raise additional capital, Pure Juice Ltd issued 500 preference stock that paid GHC 6.5 annually per share and sold for GHC 95 per share. Treasury bills pay 8% and the expected return on the market is 17%. Financial experts have estimated that Pure Juice Ltd has a beta of 0.92. If the corporate tax rate is 36%.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The capital structure of DCF Enterprises Inc. consists of 18 million shares of common stock and 1 million warrants. Each warrant gives its owner the right to purchase one share of common stock for an exercise price of $17. The current stock price is $26, and each warrant is worth $10. What is the new value of the company? What is the new stock price?
Superb Manufacturing company has 9 million shares of common stock outstanding. The current share price is PKR 52, and the book value per share is PKR 10. The company currently paid PKR 4 as dividend and it is expected to grow at 4 percent. The company also issued bonds twice which stand outstanding. The first bond issue has book price 70 million with face value per share PKR 1000, an 8 percent coupon, and sells for 104 percent of face value. The second issue has book value of 50 million, with face value per share PKR 1000, a 7.5 percent of coupon, and sells for 97 percent face value. The first issue matures in 10 years and second in 6 years. Assume that overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make annual payments. The tax rate is 35 percent. Use the given information to calculate weighted average cost of capital.
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Harvey LLC’s capital structure consists of a 25-year bond issued 5 years ago with a coupon of 6% and a par value of $14,000,000. The company’s main competitor just issued a similar bond paying 5%. The company has 1,000,000 common shares outstanding at a market price of $14.35 per share and a Beta from Yahoo Finance of 1.53. It has also issued 25,000 shares of preferred stock which is selling today at $235 per share and a annual dividend per share of 13.50. The firm has a 10 year $12,500,000 loan with annual payments at 6.25% interest that it received 2 years ago. The T-note rate is 1.9% and Money Magazine forecasts the return of the S&P 500 for this year at 8.5%. The tax rate for the company is 33%. Calculate the company’s WACC

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