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 cost of equity iii. The cost of debt iv. Cost of preferred shares v. WACC for the new project

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 18P

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