Question
Amanda Ltd paid a dividend for the financial year end 31st December 2020 of $0.40 per share. The expected growth rate for the coming
Amanda Ltd paid a dividend for the financial year end 31st December 2020 of $0.40 per share. The expected growth rate for the coming year is 5% and the current cost of debt before tax is 4%. The current share price is $0.40 per share and the tax rate is 30%. Finally, the firms capital structure which is considered to be optimal is as follows: Debt $240m Equity $360m Total $600m Required: (a) Calculate the effective cost of debt as at 31st December 2020. (3 marks) Path: p Font family Font size Paragraph (b) Calculate the effective cost of equity as at 31st December 2020. (3 marks) Font family Font size Paragraph Path: p (c) Estimate the weighted average cost of capital. (3 marks) Font family Font size Paragraph
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started