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kindly help You have been hired as a consultant to Oppo Ltd. The company is looking at building a research and production facility to produce
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You have been hired as a consultant to Oppo Ltd. The company is looking at building a research and production facility to produce a new line of smartphones. The company estimates that it will cost R50 million to build the plant. The following current market data on Oppo's securities refers: Debt: 20 000, 10% coupon bonds, 15 years to maturity, selling at a discount of R750. The bonds have a R1 000 par value each and make semi-annual payments. Equity: 300 000 shares in issue, selling for R20 per share; the share's beta coefficient is 1.5 Preference shares: 5 000, 8% preference shares in issue selling for R60 per share. The preference shares have a par value of R100. Market: 12% return on the market portfolio; 9% risk free rate. Other information: Oppo's before tax cost of debt is 10.25% and the applicable tax rate for is 28%. 2.1 Calculate the relevant market value capitalisation weights of the debt, preference shares and equity. Provide your answers only on Moodle. [6] Debt Shares = a) Market Value b) Weight Equity c) Market Value d) Weight Preference Shares = e) Market Value f) Weight 2.2 Calculate the after-tax cost of debt. Provide your final answer only [2] 2.3 Calculate the cost of equity. Provide your final answer only [2] 2.4 Calculate the cost of preference shares. Provide your final answer only [2] 2.5 Compute the project's weighted average cost of capital (WACC). Provide your final answer only [3] Step by Step Solution
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