Gigih Selalu Limited is deciding to invest in a new project. The project would have a similar risk as its existing projects. The company needs to determine the appropriate discount rate for evaluation purposes. The market risk premium is 8% and risk-free rate is 4,5%. Assume company’s tax rate is 35%. The company has 8,000 6.5% coupon bonds outstanding, RM1,000 par value, 20 years to maturity, selling at 92% of par. The bond makes semiannual payments. The company also has 250,000 common shares outstanding, selling at RM57 per share, with the beta of 1.05. In addition to common stock, Gigih Selalu Limited has 15,000 shares of 5% preferred stock outstanding, currently selling for RM93 per share. From the information above, calculate: i. The total market value of the firm ii. The cost of equity iii. The cost of debt iv. Cost of preferred shares v. WACC for the new project
Gigih Selalu Limited is deciding to invest in a new project. The project would have a
similar risk as its existing projects. The company needs to determine the appropriate
discount rate for evaluation purposes. The market risk premium is 8% and risk-free rate is
4,5%. Assume company’s tax rate is 35%.
The company has 8,000 6.5% coupon bonds outstanding, RM1,000 par value, 20 years to
maturity, selling at 92% of par. The bond makes semiannual payments.
The company also has 250,000 common shares outstanding, selling at RM57 per share,
with the beta of 1.05.
In addition to common stock, Gigih Selalu Limited has 15,000 shares of 5% preferred
stock outstanding, currently selling for RM93 per share.
From the information above, calculate:
i. The total market value of the firm
ii. The
iii. The cost of debt
iv. Cost of
v. WACC for the new project
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
