(a) Given the following information, calculate the weighted average cost of capital (WACC) explaining any assumptions...
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(a) Given the following information, calculate the weighted average cost of capital (WACC) explaining any assumptions you make along the way. The current dividend per share, do = 15p The cum div market price per share, Po= 325p The current earnings per share, eo = 30p The book value of capital employed = £3,000,000 There are 6 million shares in issue 50,000, 18% irredeemable debentures currently quoted at £130 cum int. £10,000,000, 7-year bank loan at 7% above base. 200,000, 10% redeemable debentures that mature in 5-years, and have a current market price of £90 ex int. Base rate = 10% Corporation tax = 30% [60%] (b) Discuss the assumptions behind the use of the WACC as a discount rate in investment appraisal. [40%] (a) Given the following information, calculate the weighted average cost of capital (WACC) explaining any assumptions you make along the way. The current dividend per share, do = 15p The cum div market price per share, Po= 325p The current earnings per share, eo = 30p The book value of capital employed = £3,000,000 There are 6 million shares in issue 50,000, 18% irredeemable debentures currently quoted at £130 cum int. £10,000,000, 7-year bank loan at 7% above base. 200,000, 10% redeemable debentures that mature in 5-years, and have a current market price of £90 ex int. Base rate = 10% Corporation tax = 30% [60%] (b) Discuss the assumptions behind the use of the WACC as a discount rate in investment appraisal. [40%]
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Answer rating: 100% (QA)
a Calculation of Weighted Average Cost of Capital WACC Assumptions Market capitalizationMarket capitalization Po Shares 325pshare 6 million shares 195... View the full answer
Related Book For
Intermediate Financial Management
ISBN: 9780357516669
14th Edition
Authors: Eugene F Brigham, Phillip R Daves
Posted Date:
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