Weighted Average Cost of Capital (WACC) The company has been investigating a number of projects but has been unable to accurately calculate an appropriate benchmark rate for measuring these projects. You have been supplied with the following information and asked to calculate the weighted average cost of capital (WACC) for the company. Geotech Consulting Statement of Financial Position (extract from 30 June 2010 accounts) Common Stock par value $2.00 4,000,000 14% Preference Shares par value $3.00 3,000,000 12% Bonds semi-annual (face value $100) 2,000,000 Term Loan 350,000 Mortgage 700,000 Additional Information: The ordinary shares are currently trading at $2.86 while the Preference shares are trading at $3.15. Return on government bonds is 4%, the market risk premium 6% and the growth rate in dividends has been consistently 3% over the past five years. A consultant has estimated the company to have a beta of 1.3. Corporate tax rate is 35% The bonds originally had a 6 year term to maturity and were issued exactly two years ago. The before tax return on similar risk bonds is 9% Interest on the term loan is 10% and the Mortgage 9%. Required; Calculate the weighted average cost of capital for CTRL using the market valuation approach (show your workings). Answer: Need to know an answer and how do you get numbers Weighted Average Cost of Capital (WACC) The internal rate of return for the project is 13%. While this rate is higher than the market rate, the management would like to compare it to the company’s current cost of capital. You have been provided with the following information and asked to calculate the weight average cost of capital. The company issued 2,000 six year semi-annual bonds two years ago with a face value of $1,000 and coupon rate of 8%. The bonds are currently trading at $1150. The company also have a 9% term loan with an outstanding principal of $750,000. The only other component of debt is a $1.2 million 7.5%…
We value our customers and so we ensure that what we do is 100% original..
With us you are guaranteed of quality work done by our qualified experts.Your information and everything that you do with us is kept completely confidential.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
The Product ordered is guaranteed to be original. Orders are checked by the most advanced anti-plagiarism software in the market to assure that the Product is 100% original. The Company has a zero tolerance policy for plagiarism.Read more
The Free Revision policy is a courtesy service that the Company provides to help ensure Customer’s total satisfaction with the completed Order. To receive free revision the Company requires that the Customer provide the request within fourteen (14) days from the first completion date and within a period of thirty (30) days for dissertations.Read more
The Company is committed to protect the privacy of the Customer and it will never resell or share any of Customer’s personal information, including credit card data, with any third party. All the online transactions are processed through the secure and reliable online payment systems.Read more
By placing an order with us, you agree to the service we provide. We will endear to do all that it takes to deliver a comprehensive paper as per your requirements. We also count on your cooperation to ensure that we deliver on this mandate.Read more