AF208 Exam.pdf - Adobe Acrobat Reader DC (64-bit) File Edit View Sign Window Help Home Tools !u... Tute Qu... AF208 ... x Tute Qu... Tute Qu... Tute Qu... Tutorial ... Chapter... Tute sol... < > Sign In 8 / 17 75% SECTION B PROBLEM SOLVING QUESTIONS 50 MARKS (SUGGESTED TIME ALLOCATION: 90 Minutes) Question 1 (15 marks) Tanoa Ltd is the Fijian subsidiary of a large Australian company. Most of the shareholders are overseas residents who cannot utilise imputation credits. The company is interested in calculating its weighted average cost of capital and has presented you with the following data: I. II. III. IV. $500 000 can be borrowed from the bank for a term of 10 years. The bank will charge Tanoa Ltd an annual effective rate of 12% pa. Preference shares have a market price of $7 and pay an annual dividend per share of $0.85. Flotation costs will be 3.7% of the issue price of $7.80. The firm has $400 000 of retained earnings available for investments. Tanoa Ltd 's ordinary shares have a market value of $7.50 per share. The next dividend is expected to be $0.75. The current growth rate of % is expected to continue indefinitely. Flotation costs will be 2.8% for shares issued at $7.25 each. The corporate tax rate is 30 per cent. The target capital structure is as follows: Search 'Add Image' Export PDF Adobe Export PDF Convert PDF Files to Word or Excel Online Select PDF File AF208 Exam.pdf Convert to Microsoft Word (*.docx) Document Language: English (U.S.) Change Source $('000) Long-term debt 460 Preference shares. 250 Ordinary shares 460 Required: Calculate the appropriate WACC for Tanoa Ltd to use, assuming no retained earnings are available for investing in new projects. 25C Cloudy Question 2: (9 marks) 300 d Convert, edit and e-sign PDF forms & agreements Free 7-Day Trial 12:22 am 07/07/2022