Financial Management WAAC Cost of Debt Ordinary Shares & Dividends Questions Hi there: Attached to this, you will find: 1) The “revision questions” file

Financial Management WAAC Cost of Debt Ordinary Shares & Dividends Questions Hi there:

Attached to this, you will find:

1) The “revision questions” file where you will have to complete only the first one, as I said just to clarify the points for tomorrow’s exam.

2) A video file attached that explains everything about tomorrow’s exam session.

3) Additional Notes

Hopefully these will help you understand the requirements more 🙂 Excel Sheet
1
Finding WACC for a Real Firm
Microsoft(MSFT)
+667
10.0372 or 3.72%
woul. Calculating the
becac Cost of Debt
1
2019
higher .Current Debt (Balance sheet)
1
$5,516,000.00
•Long-Term Debt (Balance sheet) | $66,662,000.00
ar peric Total Debt
I $72,178,000.00
(Current Debt + Long Term Debt)
1
• Interest Paid (come stakivet) ;$2,686,000.00
06)² + 60 •Average interest Rate
(cost of debt)
G Interest Paid/Total Debt
Calculating the Tax Rate 1
Income before taxes Cocowe
O 051: Income tax expense Starwet) $4,448,000.00
(Stamment)
$43,688,000.00
•Average Tax Rate
0.10 or 10%
( Income tax expense
Income b4 tases)
Cost of Equity
10.ggg or
approx.
10%
-06051
05 5.5
.
Projected Div.
Share Price Average g.)
Calculating the weights
No. of shares outstanding stutitel 7580000
current share price
$178.60
– Market value of Equity
(w.opstures out a corast muie pede) ($1,353, 788,000.00
Market value of Debt
liftotal Debt (calculated above))
$72, 178,000.00
• Total Value of the company $1,425,966,000.00
by Market value of Equity
)
Market value of Debt
…
H
.
(Market value of Equity
Company |
Percentage
Market value of Debt
Total Value of company
Total Value of legarty)
of
Debt
1
10.05061
campany
WACC
Costol
(Percentage of Personage
Equity
10.09663 or 9.6%
x Equity
cost of Percentage
x
Debt
of
X
11- Aug.
Debt
Tax Rate)
v)’
FE
3
Revision Questions
ria
1 Cost of Capital & WACC
-Ordinary shares €200,000
– Retained Earnings € 200,000
-Preference shares € 100,000
-Long term Loan €50,000
Long Term Loan: 12% interest before tax
. Preference Shares: FV-4€, D:X-152, P-6€,F-0.20€
Ordinary Shares: P=156,9-4% ,D=2€ , F-37 of SP
1. Retained Earnings: B= 4.3, 8-22% retorn a 15%, Tax late=40%
a) Calculate the cost of the locin (as a %)
(6) Calculate the cost of the preference shares las ax)
c) Calculate the cost of equity (1)
d) calculate the weighted average cost of captal (WACC)
SOLUTION
a) 12% before tax
E
xrps
| After tax
12% *(1-40²)} = ra = (1 – Tc)
0.12. (1-0.40)
042060
10.072=77.27
WACC= Vard + (1 – Tc) + S
LD Dest
– Total Value
Lord Cost of Debt
“To Coorp. Tax Rate
4PS Preferred Shares
Lyrps Cost of Prefered Shares
LE Common Equity
LTE a cost of Equity…

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