Suppose a company ABC raised £1m in capital last year using loans and equity with a WACC of 10% and an expected rate of return of 5% from shareholders.

This year it increases its principal debt by 20% at the same interest rate of 5% and buys back half of the shares it had issued, increasing the amount of capital raised by £250k with a new WACC of 5%. How much debt did they have last year?

Assume a tax-rate of 0%. 

a. £444,000
b. £357,000
c. £369,000

d. £501,000

Answer rating: 100% (QA)

The detailed answer for the above que... View the full answer