QUESTION 1 [25 MARKS] The following statement of financial position information relates to Tura Co, a company listed on a large stock market which pays corporation tax at a rate of 30%. N$m N$m Equity and liabilities Share capital 17 Retained earnings Total equity Non-current liabilities Long-term borrowings Current liabilities 21 Total liabilities Total equity and liabilities 66 The share capital of Tura Co consists of N$12m of ordinary shares and N$5m of irredeemable preference shares. The ordinary shares of Tura Co have a nominal value of N$0.50 per share, an ex dividend market price of N$7.07 per share and a cum dividend market price of N$7.52 per share. The dividend for 2021 will be paid in the near future. Dividends paid in recent years have been as follows: Year 2020 2019 2018 2017 Dividend (N$/share) 0.43 0.41 0.39 0-37 The 5% preference shares of Tura Co have a nominal value of N$0-50 per share and an ex dividend market price of N$0.31 per share. The long-term borrowings of Tura Co consist of N$10m of loan notes and a N$3m bank loan. The bank loan has a variable interest rate. The 7% loan notes have a nominal value of N$100 per loan note and a market price of N$102-34 per loan note. Annual interest has just been paid and the loan notes are redeemable in four years' time at a 5% premium to nominal value. QUESTION 1 25 Marks REQUIRED Marks 15 (a) Calculate the after-tax weighted average cost of capital of Tura Co on a market value basis. 15 13 32 34 QUESTION 1 [25 MARKS] The following statement of financial position information relates to Tura Co, a company listed on a large stock market which pays corporation tax at a rate of 30%. N$m N$m Equity and liabilities Share capital 17 Retained earnings Total equity Non-current liabilities Long-term borrowings Current liabilities 21 Total liabilities Total equity and liabilities 66 The share capital of Tura Co consists of N$12m of ordinary shares and N$5m of irredeemable preference shares. The ordinary shares of Tura Co have a nominal value of N$0.50 per share, an ex dividend market price of N$7.07 per share and a cum dividend market price of N$7.52 per share. The dividend for 2021 will be paid in the near future. Dividends paid in recent years have been as follows: Year 2020 2019 2018 2017 Dividend (N$/share) 0.43 0.41 0.39 0-37 The 5% preference shares of Tura Co have a nominal value of N$0-50 per share and an ex dividend market price of N$0.31 per share. The long-term borrowings of Tura Co consist of N$10m of loan notes and a N$3m bank loan. The bank loan has a variable interest rate. The 7% loan notes have a nominal value of N$100 per loan note and a market price of N$102-34 per loan note. Annual interest has just been paid and the loan notes are redeemable in four years' time at a 5% premium to nominal value. QUESTION 1 25 Marks REQUIRED Marks 15 (a) Calculate the after-tax weighted average cost of capital of Tura Co on a market value basis. 15 13 32 34
