Southern Ocean Mining Pty Ltd, an Australian listed company, has 1 000 000 ordinary shares outstanding and
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Question:
Southern Ocean Mining Pty Ltd, an Australian listed company, has 1 000 000 ordinary shares outstanding and the current market price per share is $13. The required rate of return for the ordinary shares is estimated to be 15%. They have issued bonds with a face value of $8 000 000, but the current market value based on a yield to maturity of 5.5% is $7 750 250. If the corporate tax rate is 30%, what is the weighted average cost of capital assuming an imputation tax system? Assume all registered shareholders are Australian residents and all dividends are fully franked.
Select one:
a. 7.83%
b. 8.42%
c. 9.75%
d. 8.02%
e. 9.48%
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