Question
You are provided with the following information for the GHJ company: The current share price is 5.30. There are currently 3 million shares in issue.
You are provided with the following information for the GHJ company:
The current share price is 5.30. There are currently 3 million shares in issue.
The cost of equity capital is 15%.
The company has debt capital with a face value of 100 per unit and a total face value of 10million.
The loan stock is currently selling at 141 per unit.
The cost of debt capital is 11%.
Calculate the WACC for GHJ.Assume there are no taxes and no bankruptcy costs.
Using the information provided in question 4, now calculate the WACC for GHJ ifthere is a corporate profits tax of45% and debt capital is tax deductible. Assume all other details inquestion 4remain unchanged.
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Valuation Measuring and managing the values of companies
Authors: Mckinsey, Tim Koller, Marc Goedhart, David Wessel
5th edition
978-0470424650, 9780470889930, 470424656, 470889934, 978-047042470
