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The following are extracts from the statement of financial position of a company:
$’000 $’000
Equity
Ordinary shares 8,000
Reserves 20,000
28,000
Non-current liabilities
Bonds 4,000
Bank loans 6,200
Preference shares 2,000
12,200
Current liabilities
Overdraft 1,000
Trade payables 1,500
2,500
42,700
The ordinary shares have a nominal value of 50 cents per share and are trading at $5.00 per share. The
preference shares have a nominal value of $1.00 per share and are trading at 80 cents per share. The bonds
have a nominal value of $100 and are trading at $105 per bond.
What is the market value based gearing of the company, defined as prior charge capital/equity?why is prior year charge capital said in BPP kit that pref shares is 1.6m?
The market value of the preference shares is 80c per share, so the total market value is 2,000,000 x 80c = $1,600,000
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