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CAN ANYONE HELP ME TO ANSWER THE ABOVE QUESTION PLS ? IT'S AN EMERGENCY PLEASE HELP NEEDED Q1. (a) Spinfluence Berhad has in its books
CAN ANYONE HELP ME TO ANSWER THE ABOVE QUESTION PLS ? IT'S AN EMERGENCY PLEASE HELP NEEDED
Q1. (a) Spinfluence Berhad has in its books the following information on its sources of capital. Ordinary shares of RM1 each 10% cumulative preference shares at RM1 each RM1,000-par value, 8% coupon, 15-year bonds RM2,000,000 RM1,000,000 RM2,000,000 The ordinary and preference shares are currently quoted at RM2.25 and RM0.95 per share respectively, whilst the bonds are sold with an average discount of RM30 per bond. Ordinary dividend, preference dividend and annual interest for the current year have just been paid. The company is taxed at a rate of 40%. The company's record of ordinary dividend per share for the past six years is as follows: Year 2014 Year 2015 Year 2016 Year 2017 Year 2018 Year 2019 RM0.140 RM0.140 RM0.145 RM0.155 RM0.170 RM0.185 Spinfluence is also considering the following independent investment opportunities: Projects B D E Cost (RM) 230,000 275,000 225,000 370,000 200,000 IRR (%) 11.25 10.70 10.25 12.00 10.95 Spinfluence believes that its long-term optimal capital structure should be in the ratio of 50:20:30 for ordinary shares, preference shares and debt, respectively. (i) If this capital structure ratio can be achieved without altering the current component costs, calculate the company's weighted average cost of capital (WACC). (12 marks) Based on the calculated WACC, decide which project should be undertaken. Why? (2 marks) What is the total capital budget of Spinfluence for the next planning period? (1 mark)Step by Step Solution
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