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Use the following information to answer the questions below that are required to ultimately calculate a company's WACC: Long-term bonds: 3,500 bonds outstanding with
Use the following information to answer the questions below that are required to ultimately calculate a company's WACC: Long-term bonds: 3,500 bonds outstanding with 7.20% p.a. coupons paid semi-annually, $1000 face value, 25 years to maturity, current market yield is 5.72% p.a. Preference shares: pay a dividend of 8% p.a. forever on a $15 face value, 45,000 outstanding, currently selling for $14.20 per share. Ordinary shares: 175,000 shares outstanding selling for $37 per share with beta of 1.15. Other information: Market risk premium = 7%, risk-free rate = 3.1% p.a., company tax rate = 30%. (a) What is the total market value of the bonds? (b) What is the total market value of preference shares? (c) What is the total market value of ordinary shares? (d) What is the required rate of return on bonds? (e) What is the required rate of return on preference shares? (f) What is the required rate of return on ordinary shares? (g) What is the weighted average cost of capital?
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a The total market value of the bonds can be calculated as follows Total market value of bonds Number of bonds outstanding x Face value of each bond x ...Get Instant Access to Expert-Tailored Solutions
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