H Save Pen Eraser Text Undo Redo QUESTION FOUR (COST OF CAPITAL & CAPITAL STRUCTURE) Kwetu...

Transcribed Image Text:

H Save Pen Eraser Text Undo Redo QUESTION FOUR (COST OF CAPITAL & CAPITAL STRUCTURE) Kwetu Mikindani PLC wishes to calculate its weighted average cost of capital and the following information relates to the company at the current time: Number of ordinary shares Book value at 7% convertible debt Book value at 8% bank loan Market price of ordinary shares Market value of convertible debt 20 million TZS 29 million TZS 2 million TZS 5.5 per share TZS 107.11 per TZS100 bond Equity beta of Kwetu Mikindani PLC 1.2 Risk-free rate of return 4.7% Equity risk premium Rate of taxation 6.5% 30% Kwetu Mikindani PLC expects share prices to rise in the future at an average rate of 6% per year. The convertible debt can be redeemed at nominal value in eight years' time, or converted in six years' time into 15 shares of Kwetu Mikindani PLC per TZS 100 bond. REQUIRED Calculate the market value weighted average cost of capital of Kwetu Mikindani PLC. State clearly any assumptions that you make. ALL THE BEST AND HAPPY NEW YEAR 2023 4 4 1 4 > H Save Pen Eraser Text Undo Redo QUESTION FOUR (COST OF CAPITAL & CAPITAL STRUCTURE) Kwetu Mikindani PLC wishes to calculate its weighted average cost of capital and the following information relates to the company at the current time: Number of ordinary shares Book value at 7% convertible debt Book value at 8% bank loan Market price of ordinary shares Market value of convertible debt 20 million TZS 29 million TZS 2 million TZS 5.5 per share TZS 107.11 per TZS100 bond Equity beta of Kwetu Mikindani PLC 1.2 Risk-free rate of return 4.7% Equity risk premium Rate of taxation 6.5% 30% Kwetu Mikindani PLC expects share prices to rise in the future at an average rate of 6% per year. The convertible debt can be redeemed at nominal value in eight years' time, or converted in six years' time into 15 shares of Kwetu Mikindani PLC per TZS 100 bond. REQUIRED Calculate the market value weighted average cost of capital of Kwetu Mikindani PLC. State clearly any assumptions that you make. ALL THE BEST AND HAPPY NEW YEAR 2023 4 4 1 4 >