In addition to its equity financing (100,000,000 shares, on which a dividend of 10p per share was issued last year), a US corporation is funded by the following bonds , which trade at yield of around 7.75%
USD 50,000,000 corp 7.5% 2/2/2015 coupon paid annually
USD 75,000,000 corp 8.25% 2/2/2025 coupon paid annually
Over the next ten years the corporation expects its net income to grow at rate 5% per annum, before stabilizing for the following ten years. net income for last year was USD 18,500,000
Questions
1. Based on the company growth projections, is it solvent?
2. Calculate the weighted average time to receipt /payment of the company's future cash flows for twenty year horizon?
3. what implications does the pattern of cash flows have for dividend payments to the company shareholders?
4. Provide the cash flow statement(cumulative cash flow)