Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Calculate the maket value average after tax cost of capital of mascow Moscow Co has in issue 5 0 million shares of $ 1 .

Calculate the maket value average after tax cost of capital of mascow
Moscow Co has in issue 50 million shares of $1.00 nominal value per share which are currently trading at $3.50 per share. Its dividend has grown steadily from $0.20 per share five years ago to today's $0.23 per share, which has just been paid. Investors expect this rate of growth to continue.
Moscow Co also has in issue 6% convertible loan notes with a total nominal value of $80m. These loan notes are convertible into 28 ordinary shares of Moscow Co in four years' time. If not converted, the loan notes will be redeemed on the same future date at their nominal value of $100 per loan note. Each $100 loan note is currently trading at $105. Investors expect Moscow Co's ordinary share price to grow at the same historical annual rate as its dividends over the next four years.
The company also has a long-term loan of $100m at a fixed interest rate of 8% per year.
The corporation tax rate is 20% and tax is paid in the year that profits are earned.
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Management Theory And Practice

Authors: Prasanna Chandra

9th Edition

9339222571, 978-9339222574

More Books

Students also viewed these Finance questions