Question
chateau plc is a property development company in London the company has the following capital structure as at 30 nov 2017 ordinary shares 10000 retained
chateau plc is a property development company in London the company has the following capital structure as at 30 nov 2017 ordinary shares 10000 retained profits 20000 9% debenture 12000 the equity share have a current market value of 3.90 per share and the current level of dividend has been growing at a compound rate 4%per annum. the debenture of the company are irredeemable and have a current market value of 80$per 100$ norminal . interest due on the debenture at the year end has been recently been paid
the company has obtained planing permission to build a new office block in a redevelopment area. the co. wishes to raise the whole of the finance necessary for the project by the issue of more irredeemable 9% debenture of 80$ per 100$ norminal. this is in line with a large capital structure set by the co where the amount of debt capital will increase to 70% of the equity within the next 2 years
the rate of cooperation tax is 25%
Cal. the WACC of chateau plc which should be used for future investment decision
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