The followings information has been extracted from the 2027 Balance Sheet of Grand Leisure Ltd

Paid up capital 2 million shares - 4,000 000

Retained earnings - 500 000

9% debenture (maturing Nov 2025) - 300 000

Ttrade creditors- 400 000

Bank overdraft - 300 000

Lleisure paid a total of $800 000 in dividends this yt. It is expected that dividend will growth at 5% pa in perpetuity. Ordinary dividend are fully cranked

Grand Leisures market capitalization is $6 400 000

The debenture were issued at par on 2015, giving the company proceeds of $ 100 each. The current market value of each debenture is $ 107. Coupons are paid semi- annually. The Nov 2017 coupons has already been paid (Hint : 8 years remaining life).

The current bank overdraft rate is 9% pa, compounded daily. The current level of overdraft is seen as a permanent source of funds.

The corporate tax rate is 30%, and it has been estimated that the franking credit utilisation rate is 40 %.

Current market value of capital is representative of target capital structure.

Minimal retain earnings are available for investment. It is estimated that flotation costs for ordinary capital would amount to $0.20 per share

Calculate the weighted average cost of capital (WACC) for Grand Leisure Ltd

Answer rating: 100% (QA)

Okay here are the steps to calculate WACC for Grand Leisure Ltd 1 Cost of equity Using CAPM mod... View the full answer