Answer to Question #224085 in Other for David N

Question

(a) Company A is funded as follows:

 

Balance Sheet Extract

Ordinary Shares (50n)                K 2000

12% Loan Notes                        1500

8% Preference Shares (K1)        500

 

 

 

 

Details on these are as follows:

 

The company has an equity beta of 1.2. Government bonds are currently trading at 6% and the average market risk premium is 7%.

The Loan notes are currently trading at K106 per K100 note (and assume that the before tax cost of debt is now 10%).

The preference shares are trading at K0.92.

The current share price is K1.25.

The tax rate is 30%.

 

Calculate the Weighted Average Cost of Capital.          

Answer 1

Dear David N, your question requires a lot of work, which neither of our experts is ready to perform for free. We advise you to convert it to a fully qualified order and we will try to help you. Please click the link below to proceed: Submit order