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Moby Ltd has provided you with the following information. All rates are effective annual rates. Assume a classical tax system. The company has bonds
Moby Ltd has provided you with the following information. All rates are effective annual rates. Assume a classical tax system. The company has bonds on issue with a face value of $1,000 that currently pay a coupon of $60 every six months. These bonds currently trade at par. . 10-year Government Bonds yield 2% and the market risk premium is 5% pa. The beta of the company's equity is 1.5 The debt-to-equity ratio is 2.3:1 The corporate tax rate is 30% Provide all answers as decimals rounded to 6 decimal places. Question 1a (3 marks): Calculate the firm's required return on equity (rE). Give your answer as a decimal that's correct to 6 decimal places. So, for example if your answer is 1.23456789%, you can write 0.012346. Answers: Question 1b (3 marks): Calculate the after tax cost of debt. Give your answer as a decimal that's correct to 6 decimal places. So, for example if your answer is 1.23456789%, you can write 0.012346. Answers: Question 1c (3 marks): Calculate the weighting of Debt (D/V). Give your answer as a decimal that's correct to 6 decimal place So, for example if your answer is 1.23456789%, you can write 0.012346.
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