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Pls guide for trail problem with solution The following information relates to Trump Wall Constructions Ltd (referred to as TWC Ltd): TWC Ltd has 30,000
Pls guide for trail problem with solution
The following information relates to Trump Wall Constructions Ltd (referred to as "TWC Ltd"):
- TWC Ltd has 30,000 bonds outstanding with a face value and price of $1000 each, which have 10 years to maturity and pay an-annual 5% coupon.The yield on the bonds is 6% p.a.TWC Ltd's marginal corporate tax rate is 30%.
- TWC Ltd has 5 million preference shares on issue, which are currently trading for $5.00 each, giving a total market value of $25 million.They pay an annual dividend of 80 cents.
- TWC Ltd has 10 million ordinary shares on issue, which are currently trading for $6.00 each, giving a total market value of $60 million.The beta of these shares is 1.2, the risk-free rate of return is 3% and the market risk premium is 6%.
Part A, B and C
Answer the following questions in the space provided below:
a.What is TWC Ltd's cost of preference shares?
b.What is TWC Ltd's cost of ordinary shares?
c.What is TWC Ltd's weighted average cost of capital (WACC)?
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