project-finance finance experts. You have been employed by a company called Plastitubes Ltd., as a manager,...

  

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project-finance finance experts. You have been employed by a company called Plastitubes Ltd., as a manager, working with a small team of project- Plastitubes is based in Auckland's south-eastern industrial area of Penrose and manufactures a variety of Fibre Reinforced Polymer (FRP) pipes and containers used for transporting and storing corrosive liquids. Plastitubes supplies customers in New Zealand and the Pacific Islands who are mainly involved in the petrochemical and wastewater (sewage) treatment industries. Their main product, FRP pipe, has an exceptional strength to weight ratio, and weight for weight is stronger than steel. The pipes also have good shock and impact resistance and excellent flow characteristics as a smooth glass-like interior finish reduces material build-up and improves fluid transmission. Plastitubes is a medium sized company listed on the NZX and has 35 million shares on issue the current share price is $2.50. In addition, Plastitubes issued 10 million preference shares 5 years ago. These preference shares have a $1 face value and a fixed dividend of 11%p.a. The preference shares are currently trading at $1.75 each. The company's equity beta (B) is 1.30, the New Zealand market risk premium is estimated at 6.0% p.a., the yield on 10-year New Zealand government bonds is 2.30% p.a., and the company tax rate is 28%. The company's long-term debt consists entirely of 25,000 10-year bonds issued exactly 4 years ago (these are listed on NZDX). Each bond has a face value of $1,000 and an annual coupon rate of 8% (paid annually). The bonds are currently trading at a yield to maturity of 6% p.a. Extracts from Plastitubes' latest financial statements show the following: Balance Sheet of Plastitubes as at 31 March 2022 (5000) 5,000 Current Liabilities Current Assets 6,000 Non-Current Assets 80,000 Non-current Liabilities (Loans) 25,000 Preference Shares 10,000 35.000 Ordinary Shares Retained Earnings 9,000 Total Assets 85,000 Total L & OF Your project-finance team has just received a memo (see following page) from the company's Chief Executive Officer, Freddy May, and you have decided you all need to prepare thoroughly for any questions that might arise from your colleagues in the meeting mentioned in the memo. On first glance you are a little concerned with some of the CEO's calculations and feel you might have to talk briefly with Mr May before the meeting as well. a) Prepare and submit your own detailed calculation of Plastitubes' WACC. (Round your final answer up to the nearest ½%). project-finance finance experts. You have been employed by a company called Plastitubes Ltd., as a manager, working with a small team of project- Plastitubes is based in Auckland's south-eastern industrial area of Penrose and manufactures a variety of Fibre Reinforced Polymer (FRP) pipes and containers used for transporting and storing corrosive liquids. Plastitubes supplies customers in New Zealand and the Pacific Islands who are mainly involved in the petrochemical and wastewater (sewage) treatment industries. Their main product, FRP pipe, has an exceptional strength to weight ratio, and weight for weight is stronger than steel. The pipes also have good shock and impact resistance and excellent flow characteristics as a smooth glass-like interior finish reduces material build-up and improves fluid transmission. Plastitubes is a medium sized company listed on the NZX and has 35 million shares on issue the current share price is $2.50. In addition, Plastitubes issued 10 million preference shares 5 years ago. These preference shares have a $1 face value and a fixed dividend of 11%p.a. The preference shares are currently trading at $1.75 each. The company's equity beta (B) is 1.30, the New Zealand market risk premium is estimated at 6.0% p.a., the yield on 10-year New Zealand government bonds is 2.30% p.a., and the company tax rate is 28%. The company's long-term debt consists entirely of 25,000 10-year bonds issued exactly 4 years ago (these are listed on NZDX). Each bond has a face value of $1,000 and an annual coupon rate of 8% (paid annually). The bonds are currently trading at a yield to maturity of 6% p.a. Extracts from Plastitubes' latest financial statements show the following: Balance Sheet of Plastitubes as at 31 March 2022 (5000) 5,000 Current Liabilities Current Assets 6,000 Non-Current Assets 80,000 Non-current Liabilities (Loans) 25,000 Preference Shares 10,000 35.000 Ordinary Shares Retained Earnings 9,000 Total Assets 85,000 Total L & OF Your project-finance team has just received a memo (see following page) from the company's Chief Executive Officer, Freddy May, and you have decided you all need to prepare thoroughly for any questions that might arise from your colleagues in the meeting mentioned in the memo. On first glance you are a little concerned with some of the CEO's calculations and feel you might have to talk briefly with Mr May before the meeting as well. a) Prepare and submit your own detailed calculation of Plastitubes' WACC. (Round your final answer up to the nearest ½%).

Answer rating: 100% (QA)

HARF Rost of Equity X Equity Cost of Debt x x Webt CITax Rate fost of preferred stock X preferred ... View the full answer