You are given the following information concerning Indigo Limited: Debt 80,000 bonds with a 6.0 percent coupon
Question:
You are given the following information concerning Indigo Limited:
Debt 80,000 bonds with a 6.0 percent coupon rate, ten years to maturity, face value of $1000 and a quoted price of $850.71. The cost of debt before tax is 8.25%.
Ordinary Shares 600,000 fully paid ordinary shares. The dividends have an expected constant growth rate of 6 percent forever; the current price is $60.00; and the dividend next year will be $4.00. The beta is 2.0.
Preference shares 120,000 preference shares paying a dividend of $2.5 every year in perpetuity with a current price of $25.00.
Market The corporate tax rate is 30 percent; the market risk premium is 15.0 percent; and the risk-free rate is 4.50 percent.
Calculate the after tax WACC for Indigo Limited.
Basic Finance An Introduction to Financial Institutions Investments and Management
ISBN: 978-1111820633
10th edition
Authors: Herbert B. Mayo