FINC2000-A company will issue 200k perference shares
January 7th, 2018
A company will issue 200k preference shares (10 years, 50 per share) on 1 July 2015 (as equity)1.The shares are cumulative and pay an annual dividend 0f 6% on 30 June every year2. The shares are redeemable. At the end of 10 year, preference shares can choose to receive a cash payment of $50 per share or receive ordinary shares. The number of ordinary shares =(($50/market price per share on 1 july 2025+1 share)). The market price of the ordinanry share on 1 july 2015 is $10.3. On 1 july 2015, the company could issue debt securities (10 years at 7% interest per annum, returning to debt holders at the end of year 10.Questions; can this proposal raise more working capital or decrease debet to asset ratio. Please explain with calculations.