Question: please show working out step by step using proper finance terminology and don't use excel Question 4 (Total 20 marks) Moon Lid has decided to

 please show working out step by step using proper finance terminology

please show working out step by step using proper finance terminology and don't use excel

Question 4 (Total 20 marks) Moon Lid has decided to use the weighted average cost of capital (WACC) to discount the after-tax cash flows associated with project evaluation. You have been given the task of determining the after-tax WACC of the firm. You are informed that Moon Ltd uses the following securities to fund its operations . 10,000 individual bonds with a face value of $1,000 that will mature in 5 years' time and offer a coupon that is paid half-yearly. The coupon rate for these bonds is 8% per annum. The current market interest rate for these bonds is 6% per annum 700,000 ordinary shares which recently paid a dividend of 20 cents. Dividends are expected to grow at 5% per annum perpetually. The beta of Moon Ltd is 1.2, the risk-free rate is currently 3% per annum, and the expected return on the market is 12% per annum 300,000 preference shares, which pay an annual dividend of 0.5% on a stated value of $100. Each preference share is trading at a market price of $8. The company tax rate is 30% Required: a) For each source of finance, compute the market value and after-tax cost. (12 marks) b) Compute the WACC based on the computations from (a) (4 marks) c) Discuss two conditions to be met for a company's cost of capital to be used as a new project's cost of capital (2 marks) d) Discuss how interest expense is incorporated into the calculation of the NPV (2 marks)

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