Additional Information for All Question: Return on market is 10%, return on T-bills is 4%, and...

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Additional Information for All Question: Return on market is10%, return on T-bills is 4%, and companies pay 40% corporate taxand 30% capital gains tax.
Greenleaf Inc. is a newly incorporated firm that requires $500million in capital; and is raising capital through debt and equityonly. The firm is comparing one of two options on capitalraising.
Option A: The firm raises $200million through issuing bonds and$300 million through issuing 600,000 (0.6million) ordinary shares.Each bond offers a semi annual coupons of $26.0485, has a par valueof $200, matures in 10 years, and offers a YTM of 10% to itsinvestors. The firm is to offer an expected dividend of $0 at theend of the first year, and offers ordinary shareholders a return of14.92% per year.
Option B: The firm raises a total of $500 million by issuing 1million bonds and 500,000 (0.5million) ordinary shares. Each bondcosts $250, offers semiannual coupons, has a par value of $200,matures in 10 years, and offer a YTM of 11% to its investors. Eachordinary share costs $500.
Q1. (a) Option A: Calculate the price of each bond and thenumber of bonds that need to be issued to raise $200 million.
(b) Option B: Calculate the price ofeach share, and hence, the expected dividend $0 (correct to 4decimal prices) at the end of the first year.
(C) Option C: Calculate the coupon rateoffered to bond Investors.

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Q1 a Option A Calculate the price of each bond and the number of bonds that need to be issued to raise 200 million Price PV Rate Period PMT FV PV 102 2 x 10 260485 200 400 Number of bonds required 200 See Answer

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Additional Information for All Question: Return on market is10%, return on T-bills is 4%, and companies pay 40% corporate taxand 30% capital gains tax.Greenleaf Inc. is a newly incorporated firm that requires $500million in capital; and is raising capital through debt and equityonly. The firm is comparing one of two options on capitalraising.Option A: The firm raises $200million through issuing bonds and$300 million through issuing 600,000 (0.6million) ordinary shares.Each bond offers a semi annual coupons of $26.0485, has a par valueof $200, matures in 10 years, and offers a YTM of 10% to itsinvestors. The firm is to offer an expected dividend of $0 at theend of the first year, and offers ordinary shareholders a return of14.92% per year.Option B: The firm raises a total of $500 million by issuing 1million bonds and 500,000 (0.5million) ordinary shares. Each bondcosts $250, offers semiannual coupons, has a par value of $200,matures in 10 years, and offer a YTM of 11% to its investors. Eachordinary share costs $500.Q1. (a) Option A: Calculate the price of each bond and thenumber of bonds that need to be issued to raise $200 million. (b) Option B: Calculate the price ofeach share, and hence, the expected dividend $0 (correct to 4decimal prices) at the end of the first year. (C) Option C: Calculate the coupon rateoffered to bond Investors.