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Owen allot has in issue 10 bonds of a nominal value

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Owen Allot has in issue 10% bonds of a nominal value of $100. The market price is $90 exinterest.Calculate the cost of this capital if the bond is:(a) Irredeemable(b) Redeemable at par after 10 yearsPage33of41
Ignore taxation.
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Example: Cost of convertible debtA company has issued 8% convertible bonds which are due to be redeemed in fiveyears' time. They are currently quoted at $82 per $100 nominal. The bonds can beconverted into 25 shares in five years' time.The share price is currently $3.50 and is expected to grow at a rate of 3% pa. Assumea 30% rate of tax.Calculate the cost of the convertible debt.)+
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d(1+kpref)+d(1+kpref)2+d(1+kpref)3+Simplifies todkprefThe cost of preference shares can be calculated askpref=dP0Don't forget however that tax relief is not given for preference share dividends.When calculating the weighted average cost of capital (see section 5), the cost ofpreference shares is a separate component and should not be combined with the cost of

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Term
Spring
Professor
BRUCE

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