Calculate their Weighted Average Cost of Capital

Assignment Help Accounting Basics
Reference no: EM132635189

Question - Amx Lit (Pty) Ltd operates in the detergents manufacturing industry. After 10 years of trading in the business, the machinery they use to manufacture started to show signs of wear and tear. The operations manager suggested to management that they should consider replacing the machinery with new ones. The CFO needed to strategies on how the business should finance the purchasing of the new machinery. The CFO needs to calculate the company's cost of capital:

Amx Lit (Pty) Ltd capital structure is as follows:

a) 1 000 000 ordinary shares trading at 180 originally issued at 120 per share

b) 360 000 preference shares issued at 200 per share currently trading at 250 per share

c) 250 000 debentures issued at 200 at 4.7% p.a (payable in 10 years time)

Additional information:

1. Amix Lit company beta is 1.3. Return on market of 11% and risk free rate of 7%

2. The company tax rate is 28%

3. Amix Lit dividend is 35 cents per share and they expect dividend growth of 10% per annum

Required - Amix Lit uses CAPM to calculate cost of equity. Calculate their Weighted Average Cost of Capital?

Reference no: EM132635189

Questions Cloud

Current problem solver process : What are some issues you have observed with the current problem solver process?
Leadership theories : Create a chart comparing at least 3 leadership theories presented in reading.
Find the net note payable to Wildhorse : At date of issuance, the prevailing rate of interest for this type of note was 11%. On Coronado's December 31, 2020 balance sheet, find the net note payable
Describe gilpin ethical dilemma : Describe Gilpin's ethical dilemma. What should Gilpin do if Myers gives her a direct order to reclassify the costs?
Calculate their Weighted Average Cost of Capital : The company tax rate is 28%. Amix Lit uses CAPM to calculate cost of equity. Calculate their Weighted Average Cost of Capital
Calculate the balance in the investment account : The fair market value of Cake in 1/1/2019 was $120,000 and in 12/31/2019, it was $132,000. Calculate the balance in the investment account
Find the total amount capitalized for the patent : Cullumber paid $355000 for legal fees in a successful defense of the patent. Find the total amount capitalized for the patent through March 31, 2021
What is Marigold Corps return on assets : Marigold Corp. reported net income of $6.0 billion, net sales of $180 billion, and average total assets of $90 billion. What is Marigold Corp. return on assets
How much Vaughn should recognize a loss on impairment : Vaughn Manufacturing owns machinery with a book value of $583000. How much Vaughn should recognize a loss on impairment

Reviews

Write a Review

Accounting Basics Questions & Answers

  Which is not a concern of the expenditure cycle

Provide a competitive advantage by providing high quality products and services. Which of the following is NOT a concern of the expenditure cycle?

  Brandeis corporation has two production departments

Under the step-method of cost allocation, the amount of costs allocated from S2 to P2 would be:

  Explaining the implications for various stakeholders

A current Contemporary Issue in Accounting as advised by your lecturer. Task Details: Students are to research the current state of a contemporary issue.

  Discuss about cash accounting and accrual accounting

Discuss about cash accounting and accrual accounting and the only difference between both the accounting methods is of timing.

  Prepare journal entries for transactions and events

The following are selected transactions of Ricks Auto Part. Ricks prepares financial statements semi annually. Prepare journal entries for the above transactions and events.

  Explai preferred stock is cumulative and fully participating

Assuming that the directors decide to declare total dividends in the amount of $382,508, determine how much each class of stock should receive under each of the conditions stated below. One year's dividends are in arrears on the preferred stock.

  How accounting for the halibut contract change under ifrss

Case - Aren't We Done Yet? How may LabCo's accounting policy and accounting for the Halibut contract change under IFRSs

  Show the entry for the sale of investments

The investments sold had been carried in the Investment Trust Fund accounts at July 1, 2012, Show the entry for the sale of investments by the pool on January

  How many common shares did saints have

How many common shares did Saints have outstanding at the end of the year? Verify that Saints' common stock balance is $7 thousand

  What should be the unit price to quote

An executive from a large merchandising firm has called your vice-president forproduction to get a price quote for an additional 100 units of a given product.

  John is a young accountant at a local cpa firm

John is a young accountant at a local CPA firm. He is wresling with a problem: tyring to decide whether to cover up a mistake made in not attaching an irrevocable election to a key client's recently sumitted tax return.

  Assume the following the real risk-free rate r is expected

assume the following the real risk-free rate r is expected to remain constant at 3. inflation is expected to be 3 next

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd