Question 3

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Question
3



(11 marks)
The following information is available for Blue Ocean Group
Ltd.:
Debt: Outstanding corporate bond that
pays annually 10% coupon rate with an annual before-tax yield to
maturity of 12%. The bond issue has face value of $1,000 and will
mature in 20 years.
Ordinary shares: Outstanding ordinary
shares which just paid a $8.50 dividend per share in the current
financial year. The firm is maintaining 4% annual growth rate in
dividends, which is expected to continue indefinitely.
Green Lagoon is the daughter company of the Blue Ocean Group and
has the following capital structure:
Required: Complete the following tasks: