Question: Tugela Enterprises Currently Has 10 Million Ordinary Shares In Issue, Which Are Selling For R8 Each. The Firm’s Recent Financial Statements Reported Earnings Per Share (EPS) Of R1.40, And A Return On Equity (ROE) Of 17.50%. The Firm Currently Pays Out 57% Of Earnings As Dividends. Tugela Has Two Debt Issues: 1st Issue: Seventy-five Thousand (75 000), …

Tugela Enterprises currently has 10 million ordinary shares inissue, which are selling for R8 each. The firm’s recent financialstatements reported earnings per share (EPS) of R1.40, and a returnon equity (ROE) of 17.50%. The firm currently pays out 57% ofearnings as dividends. Tugela has two debt issues:
1st Issue: Seventy-five thousand (75 000), 8% semi-annual couponbonds, with a yield to maturity of 9.32% and 10 years tomaturity.
2nd Issue: Sixty thousand (60 000), 6% semi-annual coupon bonds,with a yield to maturity of 6.7% and 6 years to maturity.
The tax rate is 30%.
Required: