question 1

The Prajwol Construction Ltd (PCL) is a property developer and building contractor. The company has two sources of long-term capital, debt and equity. The market interest rate on the company's $120 million of long-term debt is 8% per annum. The debt is perpetual also paying 8%. The company's tax rate is 30 per cent. The cost of the company's equity capital is 15%, and the current share price is $20 with 10 million shares outstanding.

The following data relate to the two divisions of the PCL for the past year:

	Total Assets	Current liabilities	Operating Profit
Real Estate Division	192,000,000	9,600,000	30,000,000
Construction Division	144,000,000	6,400,000	25,000,000

(a) Complete the table below to find the WACC of PCL

(b) Calculatethe EVA of the two divisions

Weight of Debt (round to 2 d.p.)

Weight of Equity (Round to 2 d.p.)

After tax Cost of debt (Rd) (round to 2 d.p.)

WACC (round to 2 d.p.)

EVA Real Estate Division

EVA Construction Division