Zambesia Lubricants Limited (ZLL) wish to calculate their weighted average cost of capital. Below is information...
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Zambesia Lubricants Limited (ZLL) wish to calculate their weighted average cost of capital. Below is information extracted from the company's most recent Statement of Financial Position and the company's annual report. 1. The firm recently paid out a dividend of E1.50. The firm has a payout ratio of 75% and its Return on Equity (ROE) is 10%. 2. The firm has 5 million ordinary shares have a par value of E10 per share and are currently trading at E16.50 per share on the Eswatini Stock Exchange. 3. The firm has forty-five thousand semi-annual coupon bonds which have two-and-a- half years to maturity. The current yield to maturity is 8%. The par value is E 1000 per bond and the coupon rate is 10%. 4. The firm has 4 million irredeemable preference shares have a par value of E7, a coupon rate of 6%. The current price per share is E10. 5. The corporate tax rate is 35%. Required: (a) Explain what a firm's cost of capital represents. (1 marks) (b) Calculate ZLL's cost of equity and preference shares. (5 marks) (c) Calculate the market value of ZLL's ordinary shares, preference shares, debentures and the total market value of the firm. (9 marks) (d) Calculate ZLL's Weighted Average Cost of Capital (WACC). (5 marks) Zambesia Lubricants Limited (ZLL) wish to calculate their weighted average cost of capital. Below is information extracted from the company's most recent Statement of Financial Position and the company's annual report. 1. The firm recently paid out a dividend of E1.50. The firm has a payout ratio of 75% and its Return on Equity (ROE) is 10%. 2. The firm has 5 million ordinary shares have a par value of E10 per share and are currently trading at E16.50 per share on the Eswatini Stock Exchange. 3. The firm has forty-five thousand semi-annual coupon bonds which have two-and-a- half years to maturity. The current yield to maturity is 8%. The par value is E 1000 per bond and the coupon rate is 10%. 4. The firm has 4 million irredeemable preference shares have a par value of E7, a coupon rate of 6%. The current price per share is E10. 5. The corporate tax rate is 35%. Required: (a) Explain what a firm's cost of capital represents. (1 marks) (b) Calculate ZLL's cost of equity and preference shares. (5 marks) (c) Calculate the market value of ZLL's ordinary shares, preference shares, debentures and the total market value of the firm. (9 marks) (d) Calculate ZLL's Weighted Average Cost of Capital (WACC). (5 marks)
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ZLLs Weighted Average Cost of Capital WACC Calculation a Cost of Capital A firms cost of capital rep... View the full answer
Related Book For
Cost Management Measuring Monitoring And Motivating Performance
ISBN: 9781118168875
2nd Canadian Edition
Authors: Leslie G. Eldenburg, Susan Wolcott, Liang Hsuan Chen, Gail Cook
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