You’re evaluating the capital structure of a firm and are required to estimate its total value basedon market prices. Following information is available to you.
1.Ordinary shares: Pacific ltd has a total of 50 million shares outstanding at the par value of £1each. The company has just announced a dividend of 10p and expected growth of thedividend is 3%. 2.Preferred shares: Pacific has issued a total of 10 million preferred shares at a par value of£0.50 each. The recent dividend announced by the firm is 7.5p
3.Corporate bonds: Pacific has issued a total of 100,000, 9% coupon bonds maturing in fiveyears’ time. Each bond has par value of £100 and the principal will be paid along with theinterest rate at the end of year 5. Total number of bonds issued is 100,000.Given this information; calculate the following:1.Estimate value of ordinary shares. 3 Marks2.Estimate value of preferred shares. 2 Marks3.Estimate value of bonds. 5 marks
4.Total value of the firm (debt plus equity). 3 MarksCurrently market value of the firm is £75 Million would you recommend buying the firm for yourestimated total value of the firm. 02 MarksPart-b10
Corporate restructuring can be voluntary as well as forced depending on the intent of managementand circumstances of a firm.
1.Evaluate the different types of voluntary corporate restructuring (pre-bankruptcy) and theirrelative merits. 10 Marks
2.Explain financial distress and its four key forms. 5 Mark
