Question: Question 1 a) The below information is extracted from the balance sheet of ABC Shipping Asia Ltd. 10% debentures ($100 par) $10,000,000 Paid-up capitalordinary shares

Question 1 a) The below information is extracted from the balance sheet of ABC Shipping Asia Ltd.

10% debentures ($100 par) $10,000,000 Paid-up capitalordinary shares ($1 par) $45,000,000 12% preference shares ($10 par) $5,000,000

Additional information:

The ordinary shares are currently traded at $5.00 per share. The beta coefficient of ABC Shipping Asia Ltd is 1.5. The risk free rate (a 10-year government bond) in the market is 3%. The average historical market premium for the past 10 years is 8%. Its debentures are priced at $102. Its preference shares are trading at par. The current return (i.e. market yield) on the company's debentures is 8%. Company tax is 30%. The existing capital structure is unlikely to change. Calculate the Weighted Average Cost of Capital (WACC) of the company.

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