Calculate after-tax weighted average cost of capital

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Reference no: EM131044494 , Length: 1000 Words

Task

Pacific Energy Limited (ASX: PEA) is an ASX-listed energy supply business. The businesses deliver low-cost ‘off-grid' power supply to the Australian resource sector and ‘grid-connected' renewable hydro power.

PEA owns and operates 22 power stations with a total power generation capacity approaching 237MW. These power stations utilise either gas, diesel, dual fuel or water to generate electricity for our long-term customers.

The Company's core business division Kalgoorlie Power Systems (KPS) has been delivering its resource sector clients, including some of the world's biggest mining companies, ‘off-grid' power supply solutions for in excess of 25 years.

i) Being part of the treasury team of Pacific Energy Limited, your first exercise is to categorize Pacific Energy's capital structure into debt and equity capital. Begin by going to the website https://www.asx.com.au/asx/research/company.do#!/PEA to obtain Pacific Energy Limited's 2015 Annual Report.

ii) Calculate after-tax Weighted Average Cost of Capital.

iii) Assuming Pacific Energy Limited's credit rating is AAA, what alternative capital structure would you recommend lowering the cost of capital to the company?

Show all your calculation and limit your report to 1,000 words.

Reference no: EM131044494

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