Question
Hi There. Could you please show me the cost of equity, debt and WACC for the following scenarios with the provided information: There are currently
Hi There.
Could you please show me the cost of equity, debt and WACC for the following scenarios with the provided information:
- There are currently 8,000,000 shares on issue. The shares are listed on the NZX and the last trade was at a price of $2.80.
- Retained earnings total $3,500,000.
- BB's bank debt of $6,000,000 costs it 4.0% p.a.
- BB's perpetual bond of $8,000,000 is issued at 6.0% and currently has a yield to maturity of 4.5%.
- The payment terms of both bank debt and the perpetual bond are interest only.
1) Scenario One:
Work out the equity, debt and WACC with the above information
2) Scenario Two:
Work out the equity, debt and WACC with the above information + a buy back of $4,000,000 worth of shares. It wants to keep cash on hand at $2,000,000 so it would fund the buyback through the issue of a new perpetual bond. It forecasts the interest rate would be 4.5%
3) Scenario Three:
Work out the equity, debt and WACC with the above information + a buy back of $6,000,000 worth of shares. It wants to keep cash on hand at $2,000,000 so it would fund the buyback through the issue of a new perpetual bond. It forecasts the interest rate would be 4.5%
Kind Regards
Chris
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