Question
IMO Bhd has 2 million ordinary shares with market price of RM20 per share. It also has RM80 million debt outstanding with after-tax cost of
IMO Bhd has 2 million ordinary shares with market price of RM20 per share. It also has RM80 million debt outstanding with after-tax cost of debt of 6%. The firm's cost of equity is 18% and the company's tax rate is 24%.
Required:
a. Calculate the value of IMO.
b. Calculate the firm's EBIT.
c. The firm plans to issue an additional RM20 million debt and use the proceeds to buy back its ordinary shares. Calculate the following after the capital restructuring:
i. Value of IMO
ii. The firm's overall cost of equity
Step by Step Solution
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Step: 1
To calculate the value of IMO Bhd In My Opinion we need to use the weighted average cost of capital WACC formula WACC takes into account the cost of e...
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Fundamentals of Corporate Finance
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford, David A. Stangeland, Andras Marosi
1st canadian edition
978-0133400694
