B Company has 10 million 25 cents ordinary shares in issue with a current price of...

 

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B Company has 10 million 25 cents ordinary shares in issue with a current price of 155 cents cum dividend. An annual dividend of 9 cents has just been proposed. The company earns an accounting rate of return to equity (ROE) of 10% and pays out 40% of the return as dividends. The company also has 13% redeemable loan notes with a normal value of $7 million, trading at $105. They are due to be redeemed at par in 5 years' time. If the rate of corporation tax is 33%, what is the company's WACC? B Company has 10 million 25 cents ordinary shares in issue with a current price of 155 cents cum dividend. An annual dividend of 9 cents has just been proposed. The company earns an accounting rate of return to equity (ROE) of 10% and pays out 40% of the return as dividends. The company also has 13% redeemable loan notes with a normal value of $7 million, trading at $105. They are due to be redeemed at par in 5 years' time. If the rate of corporation tax is 33%, what is the company's WACC?

Answer rating: 100% (QA)

Market Value of equity 10 x 155 155M Market Value of debt 7 x 105 735M Cost of Equity re ... View the full answer