Question
Assume the following information for a company (a) There are 25 million ordinary shares. The last dividend paid was $0.60 per share and this is
Assume the following information for a company
(a) There are 25 million ordinary shares. The last dividend paid was $0.60 per share and this is expected to grow at 5% per annum indefinitely. The shares have a required return of 15% pa.
(b) An overdraft of $15 million attracts an interest rate of 9% per annum.
(c) Bonds exist with a total face value of $30m, a coupon of 8% pa paid semi-annually and 5 years to maturity. Their current market yield is 10% pa compounded semi-annually.
(d) The corporate tax rate is 36%.
Calculate the Weighted Average Cost of Capital on an after tax basis.
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