Question
Nthanda PLC is an international food retailing company financed by both debt and equity capital. The total value of company's equity is K26.4 million ex-dividend,
Nthanda PLC is an international food retailing company financed by both debt and equity capital. The total value of company's equity is K26.4 million ex-dividend, currently quoted on LUSE K120 cum-Div. The company has recently paid a total dividend of K4million 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 norminal value of each share K1. They are currently quoted at 72 ngwee ex-dividend in the market. In addition, the company has issued K12.6 million of 8% irredeemable bonds. They are currently quoted at K80 ex-interest. Corporate tax currently stands at 35%. Required: A) (a). Calculate the cost of equity using the dividend growth model (b). Calculate the cost of equity using CAPM (c). Calculate Nthanda's Preference shares. (d). Calculate Nthanda's irredeemable bonds. (e). calculate WACC for Nthanda PLC using book values. (f). Calculate WACC using market values. (g). Give three examples of corporate finance decisions and briefly explain them.
B).
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