Harriet Ltd is a trading company set up a number of years ago with 5,000 £1ordinary shares issued at par. In order to expand the production facilities it needs to raise a further £150,000.
There are two possibilities:
(1) The company will issue further £150,000 5% preference shares, which have a nominal value of £1and a market value of £1 each.
(2) £150,000 loan notes will be issued at par. This will carry interest of 5% payable annually.
I. Calculate the retained profit for the year ended 31 December 2011 on the assumption that:
II. Calculate the net return for the investor on the assumption that :