NOTE:

• Properly label the values such as amounts (with $), percentages (%), and other relevant items.

• Show $ values above $1,000 without decimals and show % in 2 decimal places.

• There is no need to insert text boxes on Excel to write formulas or texts.

Wave Co is considering investing $3.5 million in some projects. The finance manager has identified three possible options from three different product lines of the company for investment and you as a consultant have been assigned the job of appraising these projects for investment.

The following information is available about the capital structure of the company:

Authorized share capital, $0.50 each	109 million shares
Issued share capital, $0.50 each	89 million shares
10% Bonds issued, $100 each	2.1 million bonds

The current market price of a share is at $6 per share after the dividend has been just paid and next years dividend per share is expected to be 12 cents. The average annual dividend growth rate is at 13 percent.

The bonds which are compounded annually are currently being traded in the market for a price of $105 per bond and redeemable in 6 years at par.

The projects identified are not divisible and may not be postponed until a future period. The annual tax rate is 30%, and it is paid one year in arrears.

REQUIREMENTS

1. Determine the cost of equity, cost of debt and weighted average cost of capital for the company.

(10 marks)