Peoples Limited has the following securities in issue: 1 million ordinary shares currently trading at N$1.30...
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Peoples Limited has the following securities in issue: 1 million ordinary shares currently trading at N$1.30 each. The last dividend paid amounted to 15.5 cents and the earnings and dividends of Peoples are expected to grow at 4% per annum. • 250 000 non-redeemable 7% preference shares with a nominal value of N$1.10 each. These shares are currently trading at N$0.65 per share. 1 550 12% unsecured bonds with a nominal value of N$100 each currently trading at N$85 each. These bonds are redeemable in 3 years' time at the nominal value. Required: (a) Calculate the weighted average cost of capital for Peoples Limited using market values. (10 marks) (b) Is there another way to calculate the weighted average cost of capital? Support your answer with a brief explanation. Define all terms used in your answer. (8 marks) Peoples Limited has the following securities in issue: 1 million ordinary shares currently trading at N$1.30 each. The last dividend paid amounted to 15.5 cents and the earnings and dividends of Peoples are expected to grow at 4% per annum. • 250 000 non-redeemable 7% preference shares with a nominal value of N$1.10 each. These shares are currently trading at N$0.65 per share. 1 550 12% unsecured bonds with a nominal value of N$100 each currently trading at N$85 each. These bonds are redeemable in 3 years' time at the nominal value. Required: (a) Calculate the weighted average cost of capital for Peoples Limited using market values. (10 marks) (b) Is there another way to calculate the weighted average cost of capital? Support your answer with a brief explanation. Define all terms used in your answer. (8 marks)
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a Weighted average cost of capital WACC using market value of capital components 866 b Another way t... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0132162302
1st edition
Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Posted Date:
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