Question: QUESTION THREE (15 MARKS) Kapendo ltd is a highly geared company with the following optimal capital structure. - Equity capital is twice the value of

QUESTION THREE (15 MARKS) Kapendo ltd is a highly geared company with the following optimal capital structure. - Equity capital is twice the value of preference capital - Debt nance is equal to the value of equity capital plus preference share capital - Debt finance includes debentures '?O% and long term loan 30% Other information (i) Equity capital dividend rate is 10% and growth rate is 2.5% p.a, par value of ordinary share is 511.15 and market value is sthO. (ii) Debentures interest rate is 14% pa ,par value is 100 each and market value is sh. 95 (iii) Preference shares are currently trading at shs.18 and the par value per share is shs. 12 per share (iv) Interest rate for the term loan is 17% pa (v) Corporation tax rate is 30% Required: a) Calculate the weighted average cost of capital (WACC) (10 Marks)

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Kapendo ltd is a highly geared company with the following optimal capital structure. Equity capital is twice the value of preference capital Debt finance is equal to the value of equity capital plus...

Question 5 (15 marks) Thando Ltd had approached your company to analyse 2 possible capital structures. The firm currently has total assets of R5 million and it is assumed to be constant. It also has...

ACCT2060- Accounting for Organisations and Society Marking Rubric for Individual assignment Semester 1 2016 High distinction 10 Distinction 7.5 Credit 6.5 Pass 5 Below standards 2.5 Title page, and...

I wanted to ask a question regarding questions 12 and 13, under section 16.4 of the file I uploaded. In question 12, we had to calculate the value of the firm without leverage. In question 13 we had...

Norwich is considering replacing one of its printers with either of two printers - printer or printer B. Printer A is highly automated, computer controlled; printer B is less expensive and uses...

need some help with this case study Required: Elaborate on the key elements for a successful Sukuk issuance. (300 words) Discuss the drivers of Sukuk supply. (450 words) Outline some of the steps...

Hi tutor, I have been assigned to develop a master budget for airline industry and the airline we have chosen is Qantas. In master budget,I have to make following budgets, 1)Sales Budget 2)Production...

Complete the following extraction flow chart assuming you are performing an acid/base extraction extraction. Use the provided solutions as needed (you will NOT use all these solutions) and be sure to...

The Holiday restaurant budgeted 3,600 covers to be served in December, and the budgeted price per cover was $11. The variance analysis shows that the company's actual revenue was $35,000, and actual...

What is true about California law and deductions for business expenses? Group of answer choices Any business expense can be deducted Business expenses incurred by a taxpayer under 2 1 years of age...

Steve's property tax is $140 less than Patricia's property tax. If Steve's property tax is $1,960, then Steve's property tax is what percent less than Patricia's property tax, to the nearest 0.1...