In: Finance
Blooming Ltd. currently has the following capital structure:
Debt: $2,500,000 par value of outstanding bond that pays annually 12% coupon rate with an annual before-tax yield to maturity of 10%. The bond issue has face value of $1,000 and will mature in 25 years.
Ordinary shares: 65,000 outstanding ordinary shares. The firm plans to pay a $7.50 dividend per share in the next financial year. The firm is maintaining 3% annual growth rate in dividend, which is expected to continue indefinitely.
Preferred shares: 40 000 outstanding preferred shares with face value of $100, paying fixed dividend rate of 14%.
Company tax rate is 30%.
Required: Complete the following tasks: