a. You are required to calculate the Weighted Average Cost of Capital (WACC) of Sethoo & Sons Limited from the data below: Black Limited Star Limited Number of Ordinary 2,000,000 1,000,000 Shares (GHC 1.00) Net Income available 600,000 250,000 to Ordinary Shares Gross Dividend 500,000 200,000 Market Price per share 3.00 2.00 Market value of Debts 3.000,000 1,500,000 Annual Growth rate 1296 1096 of Dividend Gross Interest yield 1096 1196 NOTE: The corporation tax rate is 50%6. Debts are currently quoted at GHC 100 per block. b. Explain why the Market Value Approach of calculating WACC is preferred to the Book Value Approach c. What are the uses of Weighted Average Cost of Capital?
a. You are required to calculate the Weighted Average Cost of Capital (WACC) of Sethoo & Sons Limited from the data below: Black Limited Star Limited Number of Ordinary 2,000,000 1,000,000 Shares (GHC 1.00) Net Income available 600,000 250,000 to Ordinary Shares Gross Dividend 500,000 200,000 Market Price per share 3.00 2.00 Market value of Debts 3.000,000 1,500,000 Annual Growth rate 1296 1096 of Dividend Gross Interest yield 1096 1196 NOTE: The corporation tax rate is 50%6. Debts are currently quoted at GHC 100 per block. b. Explain why the Market Value Approach of calculating WACC is preferred to the Book Value Approach c. What are the uses of Weighted Average Cost of Capital?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter15: Distributions To Shareholders: Dividends And Repurchases
Section: Chapter Questions
Problem 6MC: Suppose IWT has decided to distribute $50 million, which it presently is holding in liquid...
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