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Nthanda PLC is an international food retailing company financed by both debt and equity capital. The current price of their stock is quoted on LuSE
Nthanda PLC is an international food retailing company financed by both debt and equity capital. The current price of their stock is quoted on LuSE K120 cum-Div with a par value of k100. It has a total of 1,0000,000 shares outstanding. The company has recently paid a total dividend of K4 million to its shareholders. This is in line with the company's policy of increasing dividends by 5% per annum. Nthanda has an equity beta value of 1.86 . The yield on short-term government debt is 7% and equity risk premium is 7.4%. Nthanda PLC has K50, 000 9\% irredeemable preference shares in issue with a nominal value of each share of K100. They are currently quoted at K72 ex-dividend in the market. In addition, the company has issued K12.6 million of 8% redeemable in 5 years bonds. They are currently quoted at K80, ex interest. Corporate tax currently stands at 35%. Required: A. Calculate the cost of: (i) Equity using the DVM (3 Marks) (ii) Equity using the Capital Asset Pricing Model (CAPM) (3 Marks) (iii) Nthanda's Preference shares (2 Marks) (iv) Nthanda's frredeemable bonds (2 Marks)
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