b) Given certain information, calculate the WACC of the company. tax is 30% Funding Source Quantity Price Valu...
b) Given certain information, calculate the WACC of the company. tax is 30%
|
Funding Source |
Quantity |
Price |
Value |
Cost |
|
Ordinary Shares |
700,000 |
5.00 |
18% |
|
|
Preference Share |
250,000 |
4.50 |
14% |
|
|
Retained Earnings |
1,000,000 |
17% |
||
|
10%, $100 Debentures |
11,500 |
108.00 |
8% |
|
|
Bank Overdraft |
500,000 |
10% |
Homework Answers
| 1 | 2 | 3 | 4 | 5 | 6 | ||
| Source of income | Quantity | Price | Amount of Investment | Weight | Cost after tax | WACC | |
| 2*3 | 4/TOTAL | ||||||
| Ordinary Share | 700,000 | 5.00 | 3,500,000.00 | 0.48 | 0.18 | 0.09 | |
| Prefrence Shares | 250,000 | 4.50 | 1,125,000.00 | 0.15 | 0.14 | 0.02 | |
| Retained Earning | - | - | 1,000,000.00 | 0.14 | 0.17 | 0.02 | |
| 10% Debenture | 11,500 | 108.00 | 1,242,000.00 | 0.17 | 0.056 | 0.01 | |
| Bank Overdraft | - | - | 500,000.00 | 0.07 | 0.07 | 0.00 | |
| TOTAL | 7,367,000.00 | 1.00 | |||||
| WACC | 0.14 | ||||||
| Working Note: | WACC | 14% | |||||
| Cost of Debenture = | r(1-tax)(F-P/N) | r = Rate of interest | |||||
| (F+P/N) | t = Tax rate applicable | ||||||
| F = Face value of debenture | |||||||
| P= Current Market price of debenture | |||||||
| n= Redemption period of debenture | |||||||
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b) Given certain information, calculate the WACC of the company. tax is 30% Funding Source Quantity Price Valu...
Given certain information, calculate the WACC of the company. tax is 30% PLEASE ANSWER WITH WRITTEN...
Given certain information, calculate the WACC of the company. tax is 30% PLEASE ANSWER WITH WRITTEN WORKING! Funding Source Quantity Price Value Cost Ordinary Shares 700,000 5.00 18% Preference Share 250,000 4.50 14% Retained Earnings 1,000,000 17% 10%, $100 Debentures 11,500 108.00 8% Bank Overdraft 500,000 10%
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