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Lipservice Ltd , a company providing dating services, is considering revising its weighted average cost of capital ( WACC ) . It has a project
Lipservice Ltd a company providing dating services, is considering revising its weighted average cost of capital WACC It has a project under consideration and the WACC has not been reviewed for a while.
The company has the following capital structure:
R ordinary shares with a current market value of R per share. The company has paid a dividend of cents per share last year and they expect the dividend to grow by
R preference shares yielding with a current market value of R per share.
R debentures, issue price at R and market value at R
R bank loan.
The corporate tax rate is
Required
Briefly describe what is meant by capital structure in the context of WACC?
Calculate the weighted average cost of capital WACCusing the Gordons Growth model for valuing ordinary equity
If the project yields a return of should the company invest in this project? Please substantiate your answer.
What other factors would one consider before deciding to accept or reject this project?
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