Solution-Calculate weighted average cost of capital

Calculate weighted average cost of capital

Assignment Help Cost Accounting

Reference no: EM133234911

QUESTION 1.

1. Marine Limited normal credit terms to Aqua Stores are 90 days but is prepared to allow a 5% rebate if it pays the account within 30 days. Calculate the cost to Aqua Stores of not accepting the discount.

2. Differentiate in detail between accruals and bank overdraft.

QUESTION 2.

Star Traders uses a combination of shares and debt in their capital structure.

The details are given below:

There are 500 000 R0.50 ordinary shares in issue and the current market price is R1.50 per share. The latest dividend paid was 10 cents and a 9% average growth for the past six years was maintained.

The company has 250 000 R0.70, 8% preference shares with a market price of R1.60 per share.

Star Traders has a public traded debt with a face value of R700 000. The coupon rate of the debenture is 7% and the current yield to maturity of 15%. The debenture has 8 years to maturity.

They also have a bank overdraft of R100 000 due in 3 years' time and interest is charged at 14% per annum.

Additional Information:

- Star Traders has a beta of 1.5, a risk-free rate of 7.9% and a return on the market of 16.5%.

- Company tax rate is 30%.

2.1 Calculate the weighted average cost of capital, using the Capital Asset Pricing Model to calculate the cost of equity.

2.2 Calculate the cost of equity, using the Gordon Growth Model.

Reference no: EM133234911

Questions Cloud

Interest and principal were paid in cash on maturity date : What was the amount of interest expense shown in the 2024 in the income statement? What was the amount of interest expense paid in cash in 2023?

Direct materials debited to work in process inventory : How much is the amount of direct materials debited to Work in Process Inventory? How much is the materials usage variance?

Equivalent units of production for materials : What are the equivalent units of production (EUPs) for materials in the month of September assuming Townson uses weighted-average process costing?

Identify primary keys with PK and foreign keys with FK : List the table with Primary keys, attributes and foreign keys that implement the following UML class diagram given the accompanying list of attributes.

Calculate weighted average cost of capital : Calculate the weighted average cost of capital, using the Capital Asset Pricing Model to calculate the cost of equity.

Diversification-expansion and competitive opportunities : Companies pursue intercompany activities for several reasons including diversification, expansion, and competitive opportunities and returns.

Write words in the figure-eighty-three leones : Write these words in the figure. Seven hundred and sixteen thousand. five hundred and eighty-three leones. Four hundred and eighty six leones only

Find a more accurate return on equity : How exactly do you negate the depreciation expense and accumulated depreciation in the net income and equity to find a more accurate return on equity.

What factors should be considered in pricing special orders : What is the minimum price Fane should charge for this order? What factors should be considered in pricing special orders?

User Account

All Pages

Calculate weighted average cost of capital

Reference no: EM133234911

Reference no: EM133234911

Questions Cloud

Reviews

Write a Review

Cost Accounting Questions & Answers

Cost accounting assignment

Prepare the journal entries

Advise as to the liability of all the parties

Prepare revenues budget

Effect of exchange rate changes on cash and cash

Corporate governance

Cost-benefit analysis

Non-annual interest rates and annuities

Job costing in service organizations

Accounting for bad debt expense

Accounting and partnership problems

Development of relevant cash flows

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT