Answered step by step
Verified Expert Solution
Question
1 Approved Answer
You are given the following information concerning indigo Limitea: Debt 80,000 bonds with a 6.0 percent coupon rate, ten years to maturity, face value of
You are given the following information concerning indigo Limitea: Debt 80,000 bonds with a 6.0 percent coupon rate, ten years to maturity, face value of $1000 and a quoted price of $850.71. The cost of debt before tax is 8.25%. Ordinary Shares 600,000 fully paid ordinary shares. The dividends have an expected constant growth rate of 6 percent forever; the current price is $60.00; and the dividend next year will be $4.00. The beta is 2.0. Preference shares 120,000 preference shares paying a dividend of $2.5 every year in perpetuity with a current price of $25.00. Market The corporate tax rate is 30 percent; the market risk premium is 15.0 percent; and the risk-free rate is 4.50 percent. Required Calculate the after tax WACC for Indigo Limited. (8 marks)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started