Solution-Capital and the weighted average cost of capital

Capital and the weighted average cost of capital

Assignment Help Finance Basics

Reference no: EM131493169

A company manufactures a product for both the locals and for export. The company pays a corporate tax of 35% and has the following capital tax structure.

1. Ordinary shares; 1050000 ordinary shares with nominal value of 0.28 per share. The market value per share is 0.82. A dividend of 0.80 per share has been just paid and dividends are expected to grow by 6.5% per year for the foreseeable future.

2. Preference shares; 265000 preference shares of nominal value 0.55 per share. The market value of the share is 0.50 per share and the annual net dividend of 8% has just been paid.

3. Bonds; 120000 of 6%irredeemable bonds with a market price of 105 per 100par. The annual interest payment has just been made

Required:

a) Explain the difference between the capital and the weighted average cost of capital.

b) Why is it import for the cost of capital to be calculated correctly?

c) Calculate the weighted average after tax cost of capital.

Reference no: EM131493169

Questions Cloud

Value of limited brands stock when the required return : What is the value of Limited Brands stock when the required return is 9.5 percent?

Generate the same current with the same terminal voltages : Prove that the channel thermal noise of a MOSFET can be referred to the gate as a voltage given by 4kT?/gm. As shown in Fig, the two circuits must generate.

Provide a case study of a chosen job : Provide a case study of a chosen job that it shows all the privies points/ impacts on the chosen job if it is being replaced by a Robot.

Supply expense-beginning inventroy and patient receivables : What additional information is needed to make this decision. supply expense, beginning inventroy and patient receivables,

Capital and the weighted average cost of capital : a) Explain the difference between the capital and the weighted average cost of capital. b) Why is it import for the cost of capital to be calculated correctly?

First year of retirement : Your uncle is 50 years old and is planning to retire at the age of 68. He found out that you are taking a finance course and has requested

What research method was employed by the author : What research method was employed by the author(s)? How might practitioners or students apply this information in resolving accounting issues?

What made this team so special : Describe this team experience. What made this team so special? What was your role on the team? Why was this experience rewarding for you?

Differences between financial and managerial accounting : Discuss the differences between financial and managerial accounting. What types of financial statements are used by business organizations?

User Account

All Pages

Capital and the weighted average cost of capital

Reference no: EM131493169

Reference no: EM131493169

Questions Cloud

Reviews

Write a Review

Finance Basics Questions & Answers

Financial reporting and analysis

A report on financial accounting

Describe the types of financial ratios

Differences between sole proprietorship and corporation

Prepare a cash budget statement

What are the implied interest rates

State pricing theory and no-arbitrage pricing theory

Small business administration

Effect of financial leverage

Evaluate the basis for the payment to the lender

Importance of opps, ipps, mpfs and dmepos

Time value of money

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT