Patricks Pty Ltd is estimated to have a market value of $5 million. The financial statements

information for the company is provided in the following sections:

(a)Patricks Pty Ltdborrowed $800,000 a year ago from the bank. They are

currently making annual repayments of $120,000 for the 10-year

loan. Calculate the annual cost of borrowing for Philly Co

(b)The company recently issued a $1 million face value corporate

bond paying 5% p.a. coupons annually. The bond has a term of 3

years and its current market price is $898,750. What is the current

market yield of this bond?

(c)The company's preference shares currently have a book value of

$200,000. Preference shareholders of Patricks Pty Ltd receive an annual

dividend of $3 per share. The shares are currently trading at $25

each. What is the required rate of return of preference

shareholders?

(d)Ordinary shares of the company have a book value of $3 million.

The most recent dividend paid was $1.80 to ordinary shareholders.

The company has an annual dividend growth rate of 6% and the

shares are currently trading at $21.20 each. Calculate the required

rate of return for ordinary shareholders.

(e)Patricks Pty Ltd has a corporate tax rate of 30%. Using the costs of capital

you derived in sections (a) - (d), calculate the company's after-tax

weighted average cost of capital (WACC) and fill in the table.