Question: Section C - Long Answer Questions Isfahan LLC is financed through bonds (debt capital) and ordinary shares. The bonds raised a total fund of OMR

Section C - Long Answer Questions

Isfahan LLC is financed through bonds (debt capital) and ordinary shares. The bonds raised a total fund of OMR 50,000,000. The cost of bonds (debt capital) before tax is estimated to be 8 per cent.

The companys shares have a market value of OMR 100,000,000, the return on risk-free government securities is 6 per cent and the risk premium for an average risk share has been 7 per cent. Isfahans shares have a beta of 0.8.The corporate tax is 33 per cent. The net asset figure in balance sheet of Isfahan LLC is OMR 4,500,000 million.

Calculate the weighted average cost of capital.

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