Reference no: EM132927040
Questions -
Q1. Hudaverdi Ltd pay current dividends of $1.46 per share with these dividends expected to grow at a rate of 4.2% per year in perpetuity. Hudaverdi Ltd shares are currently trading at $10.91 per share. What is the cost of equity finance for Hudaverdi Ltd? Give your answer as a percentage per annum to 1 decimal place. What is the Cost of equity?
Q2. The following data applies to Micro Advanced Developers (MAD). Debt Equitymarket value of debt = $272,891 market value of equity = $800,834 time to maturity of debt = 9 years risk free rate = 4.2% pa coupon rate = 2.9% pa paid semi-annually market risk premium = 6.8% pa face value = $400,000DDD beta = 1.20
As a financial manager you have been given the task of calculating the company's weighted average cost of capital (WACC). Ignore the effect of taxes.
a) Firstly, you realise that the cost of debt is needed. Calculate the cost of debt for MAD. You may give your answer as a percentage per annum to the nearest percent or use linear interpolation or a financial calculator to give a more accurate result.
b) Secondly, the cost of equity must also be identified. Calculate the cost of equity for MAD. Give your answer as a percentage per annum to 1 decimal place.
c) Finally, calculate the weighted average cost of capital for MAD. Give your answer as a percentage per annum to 1 decimal place.
Q3. Gertrude's Great Gloves issue bonds with a face value of $1,000, paying interest at j2 = 10.75%, redeemable in exactly 12 years. An investor purchases the bond for $1,103.54. Calculate the cost of debt (j2) for Gertrude's Great Gloves. You may give your answer as a percentage per annum to the nearest percent or use linear interpolation or a financial calculator to give a more accurate result.
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