hello
if you help me out, it would be really great.
This is the past exam question and i really don't know how to get the cost of equity, debt and loan.
according to the answer the tutor gives me, the cost of equity=17.25%
the cost of debt=13.33%, the cost of loan=10.00%
(market value of equity=69%, market value of debt=11% and market value of loa=20%)
.
Weighted Average Cost of Capital WACC
The following information relates to the Harvey plc.
Extract from the Balance Sheet:
Creditors due in more than one year:
Non-redeemable debentures 8% – nominal value £100£700,000
Long-term loan – on a variable rate £800,000
Capital and Reserves: 2 million shares issued at a nominal value of 25p £500,000
Further information:
Current market price of a share 136p ex dividend.
The dividend pattern over the last few years suggests a growth rate of 9% per annum for the foreseeable future.
A dividend of 10p per share has just been paid.
The current market price of the non-redeemable debentures is £60 and interest has just been paid.
The interest rate on the long-term loan is currently 10% per annum.
if you help me out, it would be really great.
This is the past exam question and i really don't know how to get the cost of equity, debt and loan.
according to the answer the tutor gives me, the cost of equity=17.25%
the cost of debt=13.33%, the cost of loan=10.00%
(market value of equity=69%, market value of debt=11% and market value of loa=20%)
.
Weighted Average Cost of Capital WACC
The following information relates to the Harvey plc.
Extract from the Balance Sheet:
Creditors due in more than one year:
Non-redeemable debentures 8% – nominal value £100£700,000
Long-term loan – on a variable rate £800,000
Capital and Reserves: 2 million shares issued at a nominal value of 25p £500,000
Further information:
Current market price of a share 136p ex dividend.
The dividend pattern over the last few years suggests a growth rate of 9% per annum for the foreseeable future.
A dividend of 10p per share has just been paid.
The current market price of the non-redeemable debentures is £60 and interest has just been paid.
The interest rate on the long-term loan is currently 10% per annum.