What is Rio Tintos weighted average cost of capital

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Question - The following information relates to Rio Tinto Mining Corporation. What is Rio Tinto's weighted average cost of capital?

10 years ago, Rio Tinto issued 80,000 bonds with 16 years maturity and a face value of $1000 each, pays an - annual coupon amount of $100 each. The yield on the bonds is 15% p.a. Rio Tinto's marginal corporate tax rate is 30%.

Rio Tinto has 15 million preference shares on issue, which are currently trading for $3.20 each, giving total market value of $48 million. They pay an annual dividend of 30 cents per share.

Rio Tinto has 21.5 million ordinary shares on issue, which are currently trading for $4 each. These shares are expected to pay an annual dividend of $0.75 next year, and this dividend is expected to grow at the constant rate of 3% in perpetuity.

Reference no: EM132564398

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