Currently, the number of outstanding shares issued by Ponggol Limited (“Ponggol”) is 25,000,000 and it trades at $2.50 per share. Ponggol operates several high-tech indoor vegetable farms in Singapore. Three years ago, Ponggol issued 80,000 bonds (which currently trades at $1,080) based on the following terms:• Coupon = 6% (paid semi-annually)• Maturity = 10 years• Par value = $1,000A dividend of $0.15 per share was paid recently, and this is expected to grow at 4% every year forever. Risk-free rate is 3% and market risk-premium is 6%. Corporate tax rate is 17%. Appraise the weighted average cost of capital (“WACC”) of Ponggol. Calculations should be shown where appropriate.
Currently, the number of outstanding shares issued by Ponggol Limited (“Ponggol”) is 25,000,000 and it trades at $2.50 per share. Ponggol operates several high-tech indoor vegetable farms in Singapore. Three years ago, Ponggol issued 80,000 bonds (which currently trades at $1,080) based on the following terms:• Coupon = 6% (paid semi-annually)• Maturity = 10 years• Par value = $1,000A dividend of $0.15 per share was paid recently, and this is expected to grow at 4% every year forever. Risk-free rate is 3% and market risk-premium is 6%. Corporate tax rate is 17%. Appraise the weighted average cost of capital (“WACC”) of Ponggol. Calculations should be shown where appropriate.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Currently, the number of outstanding shares issued by Ponggol Limited (“Ponggol”) is 25,000,000 and it trades at $2.50 per share. Ponggol operates several high-tech indoor vegetable farms in Singapore. Three years ago, Ponggol issued 80,000 bonds (which currently trades at $1,080) based on the following terms:
• Coupon = 6% (paid semi-annually)
• Maturity = 10 years
• Par value = $1,000
A dividend of $0.15 per share was paid recently, and this is expected to grow at 4% every year forever. Risk-free rate is 3% and market risk-premium is 6%. Corporate tax rate is 17%.
Appraise the weighted average cost of capital (“WACC”) of Ponggol. Calculations should be shown where appropriate.
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