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    AE 321: Strategic Business Analysis: Activity 2 (Midterms) : Problem 1: Perpetual Bonds

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    Nhel Alvaro
    (1) The document provides instructions for an activity assignment that is due on October 12, 2021. It covers long-term financing decisions related to cost of debt and preferred shares. (2) There are 12 calculation problems divided into sections on perpetual bonds, straight bonds, straight bonds paying semiannually, and preference shares. Students are to show their work and submit answers through a Google form. (3) Feedback on solutions can be requested by commenting on the relevant activity post. Unlimited attempts are allowed to achieve a satisfactory score.

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    AE 321: Strategic Business Analysis: Activity 2 (Midterms) : Problem 1: Perpetual Bonds

    Uploaded by

    Nhel Alvaro
    867 views1 page
    (1) The document provides instructions for an activity assignment that is due on October 12, 2021. It covers long-term financing decisions related to cost of debt and preferred shares. (2) There are 12 calculation problems divided into sections on perpetual bonds, straight bonds, straight bonds paying semiannually, and preference shares. Students are to show their work and submit answers through a Google form. (3) Feedback on solutions can be requested by commenting on the relevant activity post. Unlimited attempts are allowed to achieve a satisfactory score.

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    AE321

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    (1) The document provides instructions for an activity assignment that is due on October 12, 2021. It covers long-term financing decisions related to cost of debt and preferred shares. (2) There are 12 calculation problems divided into sections on perpetual bonds, straight bonds, straight bonds paying semiannually, and preference shares. Students are to show their work and submit answers through a Google form. (3) Feedback on solutions can be requested by commenting on the relevant activity post. Unlimited attempts are allowed to achieve a satisfactory score.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    867 views1 page

    AE 321: Strategic Business Analysis: Activity 2 (Midterms) : Problem 1: Perpetual Bonds

    Uploaded by

    Nhel Alvaro
    (1) The document provides instructions for an activity assignment that is due on October 12, 2021. It covers long-term financing decisions related to cost of debt and preferred shares. (2) There are 12 calculation problems divided into sections on perpetual bonds, straight bonds, straight bonds paying semiannually, and preference shares. Students are to show their work and submit answers through a Google form. (3) Feedback on solutions can be requested by commenting on the relevant activity post. Unlimited attempts are allowed to achieve a satisfactory score.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 1

    AE 

    321: Strategic Business Analysis: Activity 2 (Midterms) 
    Instructions: 
    (A) Answer the selected or provided problems. All answers that are rates must be written in percent, rounded off to five 
    decimal places, e.g. 5.6666666%, answer 5.66667. 
    (B) Submit your answers through the google form. If you are not yet satisfied with your score, revisit the google form and 
    revise your answers. 
    (C) OPTIONAL: If you would like to be guided with how to answer specific requirement(s), submit your solution(s) to the 
    post. The solutions may be handwritten or typed. Kindly send your instructor a private comment under the relevant 
    activity post for faster feedback. 
    Topic Covered: Long‐term Financing Decisions (Cost of Debt and Preferred Shares) 
    Number of Points: 12 requirements. 2 points each. 
    Number of try/tries: Unlimited; 
    Posting Date: Oct. 8, 2021 (1:00PM) 
    Due Date: Oct. 12, 2021 (5:00pm) 
     

    Problem 1: Perpetual Bonds 
    ABC will be issuing a 4% P20,000,000‐face value bonds. The underwriter will be charging 2% of face value as its fee. ABC is 
    taxed at 20% 
    1. How much is the effective cost of the bonds? 
     

    Problem 2: Straight Bonds 
    ABC Corporation plans to issue an 8%, 15‐year, P5,000,000 face value bonds. It will incur P300,000 as underwriting fee. What 
    is the cost of the bond based on the following methods? 
    2. Interpolation method using the range 5% to 10% 
    3. Interpolation method using the range 8% to 10% 
    4. Interpolation method using the range 8% to 9% 
    5. Yield‐to‐maturity formula  
    6. Trial and error method (closest percent, 5 decimal places) 
     

    Problem 3: Straight Bonds, Semiannual 
    ABC Corporation plans to issue pieces of 12%, 10‐year, P1,000 face value bonds that pays semiannually. It will be sold at 104 
    but the underwriter will charge 2% on issue price. What is the cost of the bond based on the following methods? 
    7. Interpolation method using multiples of 1% 
    8. Yield‐to‐maturity formula  
     
    Problem 4: Preference Shares, Definite Life 
    The entity received P7,580,000 cash from the issuance of its 9%, 3‐year P8,000,000 par value preference shares. How much is 
    the cost of the preference shares using the following methods? 
    9. Interpolation method using multiplies of 1% 
    10. Yield‐to‐maturity formula 
     
    Problem 5: Preference Shares, Definite Life with Liquidating Value 
    Use the same given as in Problem 3. Additionally assume that these shares have a liquidating value of P8,200,000. How much 
    is the cost of the preference shares using the following methods? 
    11. Interpolation method using multiplies of 1% 
    12. Yield‐to‐maturity formula 
     

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