## Calculation of weighted average cost of capital, Financial Management

Assignment Help:

Calculation of weighted average cost of capital (WACC)

Market values

Market value of equity = 5m × 4.50 = \$22.5 million

Market value of preference shares = 2.5m × .0762 = \$1.905 million

Market value of 10% loan notes = 5m × (105/ 100) = \$5.25 million

Total market value = 22.5m + 1.905m + 5.25m = \$29.655 million

Cost of equity using dividend growth model = [(35 × 1.04)/ 450] + 0.04 = 12.08%

Cost of preference shares = 100 × 9/ 76.2 = 11.81%

Annual after-tax interest payment = 10 × 0.7 = \$7 Using interpolation after-tax cost of loan notes = 5 + [(5 × 7.94)/ (7.94 + 20.96)] = 6.37%

WACC = [(12.08 × 22.5) + (11.81 × 1.905) + (6.37 × 5.25)]/ 29.655 = 11.05%

#### Explain exchange rate affect the return from foreign market, Explain how ex...

Explain how exchange rate fluctuations influence the return from a foreign market measured in dollar terms. Discuss the empirical proof on the effect of exchange rate doubt on the

#### Financial projections, A total of \$426,000 seed-funding would be ideal to s...

A total of \$426,000 seed-funding would be ideal to start the project on a local basis. The cost analysis done above is for the material required to perform the work, and as the wor

#### Define leverage, Q. Define leverage? Meaning of Leverage: - The diction...

Q. Define leverage? Meaning of Leverage: - The dictionary significance of the term leverage refers to 'an increased means of accomplishing some purpose'. For instance leverage

#### Constructing index numbers, Constructing Index Numbers There are two a...

Constructing Index Numbers There are two approaches for constructing an index number namely the aggregates method and average of relatives method. The index constructed in eit

#### What is exit strategy, Exit strategy Venture capitalists and other fina...

Exit strategy Venture capitalists and other financiers will negotiate an exit strategy at the point of advancing the money. The exit strategy will involve them realising their

#### Market beta, The management of Nelson plc wish to estimate their firm’s equ...

The management of Nelson plc wish to estimate their firm’s equity beta. Nelson has had a stock market quotation for only two months and the financial management feels that it would

#### Calculate the standard deviation , The attached file (MFR & FFM Ass Returns...

The attached file (MFR & FFM Ass Returns Data.xls) gives 132 months returns for thirty securities drawn from the FT ALL share index as well as the returns on the FT ALL share index

#### Cash flow of reverse convertibles, (a) Let's presume that the firm may defa...

(a) Let's presume that the firm may default only on last coupon payment date and that when this take place stock price would be less than some predetermined price K at the expira

#### Define the main objectives of the bretton woods system, What were the main ...

What were the main objectives of the Bretton Woods system? Answer: The major objectives of the Bretton Woods system are to acquire exchange rate stability and promote internation  