YGV Co is a listed company selling computer software. Its profit before interest\\nand tax has fallen from $5 million to $1 million in the last year and its current\\nfinancial position is as follows:\\nNon-current Assets $ $\\nProperty, plant and equipment 3,000,000\\nIntangible assets 8,500,000 11,500,000\\nCurrent Assets\\nInventory 4,100,000\\nTrade receivables 11,100,000 15,200,000\\nTotal Assets 26,700,000\\nEquity\\nOrdinary shares 10,000,000\\n Reserves 7,000,000 17,000,000\\nPrepared by Lec. CHREA Kosalsola Assignment BAF301\\nCurrent Liabilities\\nTrade payables 5,200,000\\nOverdraft 4,500,000 9,700,000\\nTotal equity and liabilities 26,700,000\\nYGV Co has been advised by its bank that the current overdraft limit of $4.5 million will\\nbe reduced to $500,000 in two months' time. The finance director of YGV Co has been\\nunable to find another bank willing to offer alternative overdraft facilities and is planning\\nto issue bonds on the stock market in order to finance the reduction of the overdraft.\\nThe bonds would be issued at their par value of $100 per bond and would pay interest\ \nof 9% per year, payable at the end of each year. The bonds would be redeemable at a\\n10% premium to their par value after 10 years. The finance director hopes to raise $4\\nmillion from the bond issue.\\nThe ordinary shares of YGV Co have a par value of $1.00 per share and a current\\nmarket value of $4.10 per share. The cost of equity of YGV Co is 12% per year and the\\ncurrent interest rate on the overdraft is 5% per year. Taxation is at annual rate of 20%.\\nOther information\\nAverage gearing of sector (debt/equity, market value basis): 10%\\nAverage interest coverage ratio of sector: 8 times\\nRequired (30pts)\\na. Calculate the after-tax cost of debt of the 9% bonds.\\nb. Calculate and comment on the effect of the bond issues on the weighted\\naverage costs of capital of YGV Co, clearly stating any assumptions that\\nyou make.\\nc. Calculate the effect of using the bond issue to finance the reduction in the\\noverdraft on\\ni. The interest coverage ratio\\nii. Gearing\\n