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The directors of Flash Technologies Limited ( Ltd ) have appointed you as their financial consultant. They are seeking new project investments and require you
The directors of Flash Technologies Limited Ltd have appointed you as their financial consultant. They are seeking new project investments and
require you to calculate the present cost of capital of the company.
The capital structure is listed below:
million ordinary shares with a par value of cents each, currently trading at R per share. The company has a beta of a risk free Rf
rate of and a return on the market Rm of
million R preference shares, with a market value of R per share.
R million debentures due in years and the current yieldtomaturity is Assume at market price of R
R Bank loan, due in December
Additional information:
The dividend growth of per annum was maintained for the past years. The latest dividend paid was cents per share.
Assume a company tax rate of
Required:
Calculate the weighted average cost of capital. Use the Capital Asset Pricing Model to calculate the cost of equity. marks
Calculate the cost of equity, using the Gordon Growth Model. marks
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