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Pr
Less : Coupons on Bonds( Sh
Profit aft
less :
Pro
Earnin
Note: If we don’t assume the P/E ratio then the ALTERNATIVE solution would
Therefore number of bond required to be issued = ($60 million / 1000) = 60000 Bonds.
Coupon on the bonds = (60000*8%*1000) = $ 4.8 millions.
Pr
Less : Coupons on Bonds( Sh
Profit aft
less :
Pro
Pr
less :
Pro
14
1.44
12.56
5.024
7.536
A/i
Profit
cost of capital
($7.536 / 12.5%)
$60.288 Million
(1/ 12.5%)
8
(8*2.8461)
$ 22.77
21.183 million share * 22.77
$482.34 million
$710 Million
($60 Million)
$ 60.288 Million
$ 710.288 Million
Amount in Million
(in $)
14
4.8
9.2
3.68
5.52
A/i
Profit
cost of capital
($ 5.52 / 12.5%)
$44.16 Million
$710 Million
($60 Million)
$ 44.16 Million
$ 694.16 Million
Amount in Million
(in $)
14
5.6
8.4
A/i
Profit
cost of capital
($ 8.40 / 12.5%)
$67.20 Million
$710 Million
($60 Million)
$ 67.20 Million
$ 717.20 Million