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Can anyone help me to find Cost of debt and Cost of equity based on this? Wave Co is considering investing $3.8 million in some
Can anyone help me to find Cost of debt and Cost of equity based on this?
Wave Co is considering investing $3.8 million in some projects. The finance manager has identified three possible options from three different product lines of the company for investment and you as a consultant have been assigned the job of appraising these projects for investment. The following information is available about the capital structure of the company: Authorized share capital, $0.50 each 103 million shares Issued share capital, $0.50 each 83 million shares 10% Bonds issued, $100 each 2.5 million bonds The current market price of a share is at $6 per share after the dividend has been just paid and next year's dividend per share is expected to be 10 cents. The average annual dividend growth rate is at 16 percent. The bonds which are compounded annually are currently being traded in the market for a price of $102 per bond and redeemable in 3 years at par. The projects identified are not divisible and may not be postponed until a future period. The annual tax rate is 30%, and it is paid one year in arrears. The details of the projects identified are as follows: Wave Co is considering investing $3.8 million in some projects. The finance manager has identified three possible options from three different product lines of the company for investment and you as a consultant have been assigned the job of appraising these projects for investment. The following information is available about the capital structure of the company: Authorized share capital, $0.50 each 103 million shares Issued share capital, $0.50 each 83 million shares 10% Bonds issued, $100 each 2.5 million bonds The current market price of a share is at $6 per share after the dividend has been just paid and next year's dividend per share is expected to be 10 cents. The average annual dividend growth rate is at 16 percent. The bonds which are compounded annually are currently being traded in the market for a price of $102 per bond and redeemable in 3 years at par. The projects identified are not divisible and may not be postponed until a future period. The annual tax rate is 30%, and it is paid one year in arrears. The details of the projects identified are as followsStep by Step Solution
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