Barnyard Traders uses a combination of shares and debt in their capital structure. The details are given
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Question:
Barnyard Traders uses a combination of shares and debt in their capital structure.
The details are given below:
There are million R ordinary shares in issue and the current market price is R per share. The latest dividend
paid was cents and average growth for the past six years was maintained.
The company has R preference shares with a market price of R per share.
Barnyard Traders has a public traded debt with a face value of R The coupon rate of the debenture is and
the current yield to maturity of The debenture has years to maturity.
They also have a bank overdraft of R due in years time and interest is charged at per annum.
Additional Information:
Barnyard Traders has a beta of a riskfree rate of and a return on the market of
Company tax rate is
Required:
Calculate the weighted average cost of capital, using the Capital Asset Pricing Model to calculate the cost of equity.
Marks
Calculate the cost of equity, using the Gordon Growth Model. Marks
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