Question
how much you know kindly give the answer.if you will give the answer of Wacc it is enough for me Sameer plc, a listed industrial
how much you know kindly give the answer.if you will give the answer of Wacc it is enough for me
Sameer plc, a listed industrial Company, is considering a major investment. The Company needs an appropriate rate at which to discount the estimated after-tax cash flows for the investment. The Companys normal practice is to be based on the weighted average cost of capital (WACC). The Companys balance sheet shows 160 million Ordinary shares of OMR 0.50 each at OMR 80 million, the Preference shares of OMR 32 million and 8% Loan stock of OMR 45 million. The Ordinary shares have a market price of OMR 2.100 and an expected dividend of OMR 0.180 per share. Dividends have shown an average annual growth rate of 5% over recent years. The Companys Preference shares are selling at OMR 0.870 per share and carry a dividend of 7% per share. The Company currently has Loan stock with an 8 percent coupon rate and has a market value of OMR 100. The Loan stock is redeemable at par. The corporation tax rate is expected to be 30% for the foreseeable future. In regard to this topic, you are required to prepare a report. a. Compute the cost of capital for individual components and calculate the Companys WACC.
b. Explain the workings and discuss the assumptions of cost of capital. c. Critically discuss the criticisms of using the figure calculated in (a) as the discount rate for assessing the investment under consideration by the Company. d. Recommendations and conclusions.
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