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Finance For Business Practicing Questions

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Assignment - Finance For Business Practicing Questions - Structure and Cost of Capital

Blackberry Lid currently has the following capital structure: Debt: $3,000,000 paying 9% coupon bonds outstanding with an annual before-tax yield to maturity of 8% on a new issue. The bonds currently sell for $115 per $100 face value.

Ordinary shares: 46,000 shares outstanding currently selling for $50 per share. The firm expects to pay a $5.50 dividend per share one year from now and is experiencing a 4% growth rate in dividends, which it expects to continue indefinitely.

The firm's marginal tax rate is 30%. The company has no plans to issue new securities.

Required -

a) Calculate the current total market value of the firm?

b) Calculate the weighted average cost of capital (WACC) for the firm?

Reference no: EM132571972

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