Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Barnyard Traders uses a combination of shares and debt in their capital structure.
The details are given below:
· There are 20 million R10.80 ordinary shares in issue and the current market price is R8.50 per share. The latest dividend paid was 99 cents and 11% average growth for the past six years was maintained.
· The company has 10 500 000 R9, 8%
· Barnyard Traders has a public traded debt with a face value of R18 000 000. The coupon rate of the debenture is 7% and the current yield to maturity of 15%. The debenture has 8 years to maturity. (Note that the debenture is currently trading at R7 144 200
· They also have a bank overdraft of R8 000 000 due in 4 years’ time and interest is charged at 12% per annum.
Additional Information:
Barnyard Traders has a beta of 1.2, a risk-free rate of 6.5% and a return on the market of 11.5%.
Assume the company tax rate is 30%.
2.1 Calculate the weighted average cost of capital, using the
2.2 Calculate the cost of equity, using the
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