Company A is funded as follows: Balance Sheet Extract 2000 1500 500 750 Ordinary Shares (50n)...

 

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Company A is funded as follows: Balance Sheet Extract 2000 1500 500 750 Ordinary Shares (50n) 12% Loan Notes 8% Preference Shares (K1) Bank Loan Details on these are as follows. The company has an equity beta of 1.2. Government bonds are currently trading at 6% and the average market risk premium is 7%. The Loan notes are currently trading at K106 and are redeemable at par in 5 years' time. The preference shares are trading at 92n. The bank loan has an interest rate of 10%. The current share price is K1.25. The tax rate is 30%. Calculate the Weighted Average Cost of Capital. Company A is funded as follows: Balance Sheet Extract 2000 1500 500 750 Ordinary Shares (50n) 12% Loan Notes 8% Preference Shares (K1) Bank Loan Details on these are as follows. The company has an equity beta of 1.2. Government bonds are currently trading at 6% and the average market risk premium is 7%. The Loan notes are currently trading at K106 and are redeemable at par in 5 years' time. The preference shares are trading at 92n. The bank loan has an interest rate of 10%. The current share price is K1.25. The tax rate is 30%. Calculate the Weighted Average Cost of Capital.

Answer rating: 100% (QA)

To calculate the Weighted Average Cost of Capital WACC we need to find the cost of each component of ... View the full answer