Calculate weighted average cost of capital, Financial Management

Ocean Blue Vessels Ltd is a real Liner firm whose capital structure consists of debt, preference shares and equity shares. The company plans to raise further capital for its expansion plans. The company has issued 10 year, 45000, 10 % bonds five years back. The bond which was issued at a face value of Rs 100 is currently being sold at Rs 98.The company has issued 15,000   11% preference shares 3 years back with a redemption period of 10 years. The preference shares which have a face value of Rs100 are currently being sold at for Rs 102. The company is subject to a tax bracket of 25 %.

The company has also issued 70,000 equity shares of face value Rs 100 at the same time. The company prefers valuating its equity shares according to the Capital asset pricing mechanism. For evaluating the cost of equity the company finds it suitable to consider the market performance of past one year. The ocean blue's month end share price and the shipping index is as follows:

Month End Closing

Shipping Index

Share Prices

March

536.65

537.65

April

687.98

634.32

May

845.32

765.87

June

857.93

779.95

July

849.10

621.60

August

846.80

875.10

September

816.75

620.15

October

865.55

660.70

November

835.55

769.95

December

856.50

534.45

January

878.45

647.45

February

886.50

534.40

The risk free rate is 8 % and the market rate of return in shipping sector is 12%.

Suggest the management regarding the present weighted average cost of capital.

Posted Date: 3/9/2013 2:39:41 AM | Location : United States







Related Discussions:- Calculate weighted average cost of capital, Assignment Help, Ask Question on Calculate weighted average cost of capital, Get Answer, Expert's Help, Calculate weighted average cost of capital Discussions

Write discussion on Calculate weighted average cost of capital
Your posts are moderated
Related Questions
The Relationship between Futures Price and Cash Price Any commodity that can be bought in the market has a price, which is referred to as cash or spot price for immediate deliv

Illustrate the meaning of Gearing Gearing is the relationship between equity anddebt. Debt is typically long term liabilities that the organisation has. Equity is all the shar

Inventory days (Average inventory/Cost of sales) x 365days Average inventory can be arrived by taking this year's and last year's inventory values and dividing by 2 - (Ope

Question 1 Cost of capital is the minimum rate of return required by a firm on its investment in order to provide the rate of return by its suppliers of capital. Explain the co

Q. Show the Costs of Investment in Receivables? Costs of Investment in Receivables: - When a firm sells goods or else services on credit it has to bear numerous types of costs.

The current market value of any real or financial assets is the present value of the cash flows accruing to that asset discounted by a market determined risk-adjusted required rate

Let us construct a binomial interest rate tree for a 5.5% option free bond taking Table 3 as the binomial interest rate tree. Table 1 shows the various values in

Profit and Loss statement:   The Profit and Loss statement is the primary measure of business performance.  As the name suggests, this particular report measure whether the b

what is the major value of the weighted cost of capital calculation for the firm?

The requirement of this assignment that you write a Market Outlook for Bond Markets in a report form, in which you present your assessment of  the investment potential of global so