A. & A Til ||| Question no 1(A) Templeton was considering the acquisition of a chain of extended-care facilities and wanted to estimate its own WACC as a guide to the cost of capital for the acquisition. Templeton's capital structure consists of the following: Debt Preference shares Common shares Market values ($ millions) $100 50 250 Required: Calculate the Templeton's WACC? Templeton contacted the firm's investment banker to get estimates of the firm's current cost of financing and was told that if the firm were to borrow the same amount of money today, it would have to pay lenders 10%. The firm's tax rate is 30%, preference shareholders currently demand a 12% rate of return and ordinary shareholders demand 15%. I LB 19

Question no 1(A) Templeton was considering the acquisition of a chain of extended-care facilities and wanted to estimate its own WACC as a guide to the cost of capital for the acquisition. Templeton's capital structure consists of the following: Templeton contacted the firm's investment banker to get estimates of the firm's current cost of financing and was told that if the firm were to borrow the same amount of money today, it would have to pay lenders 10%. The firm's tax rate is 30%, preference shareholders currently demand a 12% rate of return and ordinary shareholders/demand 15%. Required: Calculate the Templeton's WACC