Assume all earnings streams are perpetuities that are constant.Company Data Current annual earnings: 1 answer below »


Integrative Questions

The Gulf Force Congregation is an electric service planning to elevate a new force-generating settle of customary plan. The congregation has traditionally hired out all hues to the supplyholders as dividends and financed important expenditures behind a while new issues of low supply. There is no something-due or preferred supply shortly unappropriated. Data on the congregation and the new force settle ensue. Assume all hues streams are perpetuities that are decided.Company Data Current annual hues: $27 darling Number of unappropriated shares: 10 darling New Force Settle Initial outlay: $20 darling Added annual hues: $3 darling Management estimates the reprimand of produce currently required by supplyholders to be 10 percent per year and considers the force settle to enjoy the corresponding induce as corporeal property. Assume there are no taxes, no costs of noncommunication, and consummate important dispenses.

a. What achieve be the whole dispense estimate of Gulf Force if low supply is issued to finance the settle?

b. What achieve be the whole estimate (stocks plus bonds) of the decided if $20 darling in bonds at an curiosity-behalf reprimand of 8 percent is issued to finance the settle, sumptuous the bonds are perpetuities?

c. Given that bonds achieve be issued as in (b), weigh the reprimand of produce required by supplyholders behind the financing has occurred and the settle has been built.