Recent financial information relating to Close Co, a stock market listed company, is as follows.

Financial analysts have forecast that the dividends of Close Co will grow in the future at a rate of 4% per year. This is slightly less than the forecast growth rate of the profit after tax (earnings) of the company, which is 5% per year. The finance director of Close Co thinks that, considering the risk associated with expected earnings growth, an earnings yield of 11% per year can be used for valuation purposes.

Close Co has a cost of equity of 10% per year and a beforetax cost of debt of 7% per year. The 8% bonds will be redeemed at nominal value in six years time. Close Co pays tax at an annual rate of 30% per year and the exdividend share price of the company is $8.50 per share.

Required:

(a) Calculate the value of Close Co using the following methods:

(i) net asset value method (ii) dividend growth model (iii) earnings yield method.

(b) Calculate the weighted average aftertax cost of capital of Close Co using market values where appropriate.

Statement of financial position information