Question

Exercise III Calculate Weighted average Cost of Capital. The company is financing its investments by bank loans (data given below). Additionally the external capital is being added by long term financing through bond issue with fixed coupon payments. Corporate tax rate is equal 19% . Based on these data please calculate WARD. Loan 1 4000000 $ Interest rate for loan 1 8.0% oan 2 2700000 $ Interest rate for loan 2 Total value of the bond 7.0% 10 000 000 $ Face value of one bond 10 000 $ Issue price (market price of the bond at the issue) Nominal interest rate (coupon rate) 10017 $ 7,5% Number of coupons during a year Maturity of the bond 2 4 19% orporate tax rate The dividend payout is the result of multiplying the dividend payout per share from last year and current number of common shares being listed and retains the base for calculating the dividend payout ratio. Profitability ratios are being calculated based on the data from the last year. None financial revenues are taken into account. Equity 8 000 000 $. The debt levels did not change from the last year. Dividend payout from the last period 11 S Current market price of common share Number of common shares listed 1170000 Financial results from the last period of time Sales revenues 9 000 000 S Variable expenses (as % of the sales revenues) Fixed expenses 55% 800 000 S Corporate tax rate Additionally please calculate how the cost of equity would change when the new issue of common share would be initiated The company would issue 300 thousand new common shares at the current market price with 15% of public offering fees. 19%