1. What is working capital? Why is working capital important?
2. Telstra Limited, the largest telecommunication company in Australia, is subject to a flat corporate tax rate of 30% and has 1,000,000 ordinary shares currently trading at $2.75 per share. Next year's ordinary dividend per share is $0.30 and the dividends are expected to grow indefinitely at 7% per annum

The company also has 300,000 preference shares with a current market value of $3.12 per share and the preference dividend per share is fixed at $0.25.

Finally, Telstra Limited has 1,000 bonds outstanding with a market value of $500 each and the current yield to maturity is 6.5% per annum. The bonds mature in 5 years' time.

Determine Telstra's weighted average cost of capital (WACC). Provide formulas

Answer rating: 100% (QA)

Working capital is a financial metric that represents the difference between a companys current asse... View the full answer