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Reference is made to the 2022 Balance Sheet of Tram-Ropes limited. Additional Information: i. The Long-Term debt consists of 8% annual coupon bonds, with 15
Reference is made to the 2022 Balance Sheet of Tram-Ropes limited. Additional Information: i. The Long-Term debt consists of 8% annual coupon bonds, with 15 years to maturity and are currently selling for 95% of par. ii. The company's common shares which have a book value of $20 per share are currently selling at $25 per share. iii. Preferred shares have a book value of $100 per share. These shares are currently selling at $120 per share and pays dividends of 6% per annum on book value. iv. The dividend growth rate is expected to be 3%, and dividend for 2023 is projected to be $5.00 per share. v. The Company's Tax rate is 30%. 3 Required: Determine the following for Tram-Ropes Limited: A. Total Market value of the firm's capital structure B. After-tax Cost of Debt (3 marks) C. Cost of Common Stock (2 marks) D. Cost of Preferred Stock (2 marks) (1 mark) E. WACC (2 marks)
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