Calculation of WACC Hazelwood plc is financed by: (a) 1 million ordinary shares (nominal value 1 each),
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Calculation of WACC Hazelwood plc is financed by:
(a) 1 million ordinary shares (nominal value £1 each), which are expected to yield a dividend of £0.10 per share in one year’s time; dividends are expected to grow by 10 per cent of the previous year’s dividend each year; the current market price of the share is
£1.80 each; and
(b) £800 000 (nominal) loan stock, which pays interest at the end of each year of 11 per cent
(of nominal) for three years, after which the loan stock will be redeemed at nominal value.
Currently the loan stock is quoted in the capital market at £95 (per £100 nominal).
The corporation tax rate is 30 per cent.
What is the business’s WACC?
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