Question
Woodville Ltd has provided you with the following information. All rates are effective annual rates. Assume a classical tax system. The company has bonds on
Woodville Ltd has provided you with the following information. All rates are effective annual rates. Assume a classical tax system. The company has bonds on issue with a face value of $1,000 that pay a fixed coupon of $45 every six months. These bonds currently trade at par. 10-year Government Bonds yield 3% and the market risk premium is 4% pa. The beta of the companys equity is 1.2 The debt-to-equity ratio is 1.5:1 The corporate tax rate is 30% Provide all answers as decimals rounded to 6 decimal places. Question 1a : Calculate the firms required return on equity Question 1b :Calculate the after tax cost of debt Question 1c: Calculate the weighting of Debt (D/V) Question 1d : Calculate the companys after-tax WACC. Give your answer as a decimal thats correct to 6 decimal places
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