Question 01:

Perfect Packers Ltd. has the following capital structure: All figures in Australian Dollar (AUD) Capital Structure Equity capital ($ 10 par value) 200,000 14% Preference share capital $ 100 each 100,000 Retained earnings 100,000 12% debentures ($ 100 each) 300,000 11% Term loan from Westpac bank 50,000 Total 750,000 The market price per equity share is $ 32. The company is expected to declare a dividend per share of $ 2 per share and there will be a growth of 10% in the dividends for the next 5 years. The preference shares are redeemable at a premium of $ 5 per share after 8 years and are currently traded at $ 84 in the market. Debenture redemption will take place after 7 years at a premium of $5 per debenture and their current market price is $ 90 per unit. The corporate tax rate is 27.5%. Required: Calculate the Weighted Average Cost of Capital (WACC)