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Please assist on answering all the questions below. You have been appointed as a financial consultant by the directors of Baron Holdings. They require you
Please assist on answering all the questions below.
You have been appointed as a financial consultant by the directors of Baron Holdings. They require you to determine the cost o capital of the company. The following information is available on the capital structure of the company: U 1500000 ordinary shares, with a market price of R3 per share. The latest dividend declared was 86 cents per share. A dividend growth of 15% was maintained for the past 5 years. 100000011%,R1 preference shares, with a market value of R3 per share. R1 0000009%, debentures due in 7 years and the current yield-to-maturity is 10%. Note that the current price of the debenture is R951356 R700 000 14\%, bank loan, due in December 2021. Additional information: - The company has a tax rate of 30%. - The beta of the company is 1.7 , a risk free rate of 5% and the return on the market is 14%. Required: 2.1 Calculate the weighted average cost of capital. Use the Gordon Growth Model to calculate the cost of equity 2.2 Calculate the cost of equity, using the Capital Asset Pricing ModelStep by Step Solution
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