Bishop Co has previously calculated figures as follows: Ke = 18.5%, market value of 1 ordinary share = $2.50 Kp = 5.4%, market value of one preference share = $1.95 Kd(1–t)’ (irredeemable debt) = 7%, market value per $100 nominal value =$105 Kd(1–t)’ (redeemable debt) = 6.9%, market value per $100 nominal value =$93.96 Kd(1–t)’ (non tradable debt) = 5.4%, book value $2m. Kp = 6%, market value of one preference share(non-cummulative) = $1.70 In addition the following information is relevant: Ordinary shares in issue 3.8 million Preference shares in issue 2.5 million Preference shares (non-cummulative) in issue 1 million Nominal value in issue of irredeemable loan notes = $6 million Nominal value of redeemable loan notes in issue = $0.8 million. Required:- Calculate the current WACC by market value
Bishop Co has previously calculated figures as follows:
Ke = 18.5%, market value of 1 ordinary share = $2.50
Kp = 5.4%, market value of one
Kd(1–t)’ (irredeemable debt) = 7%, market value per $100 nominal
value =$105
Kd(1–t)’ (redeemable debt) = 6.9%, market value per $100 nominal
value =$93.96
Kd(1–t)’ (non tradable debt) = 5.4%, book value $2m.
Kp = 6%, market value of one preference share(non-cummulative)
= $1.70
In addition the following information is relevant:
Ordinary shares in issue 3.8 million
Preference shares in issue 2.5 million
Preference shares (non-cummulative) in issue 1 million
Nominal value in issue of irredeemable loan notes = $6 million
Nominal value of redeemable loan notes in issue = $0.8 million.
Required:-
Calculate the current WACC by market values.
WACC is Weighted Average Cost of Capital which refers to the firm's cost of capital in which each category is proportionately weighted. Different capital sources like bonds, preferred stock or common stock ,all long term debts are weighted and included under WACC calculation. An increase in WACC denotes decrease in valuation and increase in risk.
Formula is :
Step by step
Solved in 2 steps with 1 images
