These data are available for B Company at December 31, 20-11. Current Liabilities : P...
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Accounting
These data are available for B Company at December 31, 20-11.
Current Liabilities : P 2,000,000
Bonds P 1,000 par : 3,000,000
Preference Shares P 20 par : 500,000
Ordinary Equity P 1.00 par : 200,000
Retained Earnings : 6,300,000
The 8.5% coupon bonds are currently selling at 96.5. The preferred shares paid a cash dividend of 10% last year and are now selling at P 18.00/share and will entail floatation costs of P 2.00 per share. Per share of Ordinary equity sells at P 40.00. Last year, ordinary equity paid cash dividend of P 0.80/ share and is to grow at the rate of five percent. If there is need for external ordinary equity, floatation costs of 15% of par will be paid. Company is subject to 40% tax. The estimated cost of bonds is near to
5.3%
8.5%
8.81%
9.94%
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