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You have been appointed as a financial consultant by the Directors of auckland holdings they require you to calculate the cost of capital of the company. The following information is available on the capital structure of the company: 1 500 000 Ordinary Shares, with a market price R3 per share. The latest dividend was 95 cents per share. A dividend growth of 10% was maintained for the past 5 years. 1000 000 12%, R1 Preference shares with a market value of R2 per share. R1 000 000 9%, Debentures due in 7 years and the current yield-to-matuarity is 10%. R1 200 000 14% Bank loan, due in december 2022. Addistional Information: 1. The company has a tax rate of 30%. 2. The beta of the company is 1.5, a risk free rate of 6% and the return on the market is 15%. Required: 1.1 Calculate the weighted average cost of capital WACC. Use the Gordon Growth Model to calculate the cost of equity. 1.2 Calculate the cost of equity, using Capital Asset Pricing Model.
Security A has a beta of 1.0 and an expected return of 12%. Security B has a beta of 0.75 and an expected return of 11%. The risk-free rate is 6%. Explain the arbitrage opportunity that exists; explain how an investor can take advantage of it. Give s..
OMG Inc. has 7 million shares of common stock outstanding, 5 million shares of preferred stock outstanding, and 4,000 bonds. Suppose the common shares sell for $17 per share, the preferred shares sell for $16 per share, and the bonds sell for 108 per..
Your firm has just issued five-year floating-rate notes indexed to six-month U.S. dollar LIBOR plus 1/4 percent. What is the amount of the first coupon payment your firm will pay per U.S. $1,000 of face value, if six-month LIBOR is currently 7.2 perc..
Calculate the variance. Calculate the Standard Deviation.
Suppose we are assuming a $5 million 20-year mortgage with 8 years remaining at a rate of 4%. If we could obtain a new 8-year mortgage for 5%, what is the value of assuming this mortgage?
The above borrowing rates represent the borrowing rates the firms can obtain for a five year fixed rate debt issue in U.S. dollars or Swiss francs. Suppose XYZ wishes to borrow Swiss francs and LMN wishes to borrow U.S. dollars. LMN demands a 11 pct ..
Assume that a bond makes 30 equal annual payments of $1,000 starting one year from today. (This security is sometimes referred to as an amortizing bond.) If the discount rate is 3.5% per annum, what is the current price of the bond?
Which of the following is an example of related diversification?
Calculate the export price and profit in $. Market price is $240.00 (what customer pays); manufacturing cost is $60.00; freight is 10% (market price); customs duty is 5.4% (market price). Calculate the export price if the distribution chain is a)
Canfield Construction applies overhead to its projects at a rate of $88 per direct labor hour. Laborers are paid an average rate of $40 per hour. The Jefferson Apartments project was charged a total of $3,200,000 in direct materials and $680,000 in d..
A stock will pay a dividend of $4 at the end of the year. It sells today for $100 and is expected to sell in one year for $105. What is the implied rate of return on this stock? Enter in percent and round to two decimal places. Please show work.
Using the GRM what is the indicated value of the subject property?
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