The following information relates to Fast Riding Coaches, a subsidiary of Super-Fast Coaches located in Vietnam:...
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The following information relates to Fast Riding Coaches, a subsidiary of Super-Fast Coaches located in Vietnam: Number of ordinary shares Book value of 8% bank loan Market price of ordinary shares Equity beta Risk-free rate of return Equity risk premium Rate of taxation Required: a) b) 20 million US$12m US$5.50 per share 1.2 4.70% 6.50% 30% Calculate the market value weighted average cost of capital of Fast Riding Coaches. State clearly any assumptions that you make. (13 marks) Critically evaluate the circumstances under which the weighted average cost of capital can be used in an investment appraisal. (12 marks) The following information relates to Fast Riding Coaches, a subsidiary of Super-Fast Coaches located in Vietnam: Number of ordinary shares Book value of 8% bank loan Market price of ordinary shares Equity beta Risk-free rate of return Equity risk premium Rate of taxation Required: a) b) 20 million US$12m US$5.50 per share 1.2 4.70% 6.50% 30% Calculate the market value weighted average cost of capital of Fast Riding Coaches. State clearly any assumptions that you make. (13 marks) Critically evaluate the circumstances under which the weighted average cost of capital can be used in an investment appraisal. (12 marks)
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Answer rating: 100% (QA)
a Calculation of the Market Value Weighted Average Cost of Capital WACC of Fast Riding Coaches Assumptions The required rate of return is calculated based on the Capital Asset Pricing Model CAPM which ... View the full answer
Related Book For
Financial Accounting and Reporting
ISBN: 978-0273744443
14th Edition
Authors: Barry Elliott, Jamie Elliott
Posted Date:
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