corporate finance

SECTION A: Question one is compulsory and carries 40 marks. QUESTION ONE Beene Ltd wishes to calculate its weighted average cost of capital and the following relates to the company at the current time Number of ordinary shares Book value of 79% debt Book value of 8% bank loan Market price of ordinary shares Market value of debt Equity beta of Beene Ltd Risk - free rate of return Equity risk premium 20 million K29 millon K2 million K0.50 per share K107 11 per 100 bond 1.2 4.7% 6.5 30% Pate of taxation Beene Ltd expects share prices to rise in the future at an average rate of 6% per year. The debt can be redeemed at par in eight years time. (a) Required Calculate the market average cost of capital of Beene Ltd. State clearly any assumptions that you make. (16 marks) Explain what a beta value of more than one implies Explain what is meant by cost of capital and weighted average cost of capital (40 marks) (b) (0)