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Question - Using the data in the given table, answer the questions asked in parts (a), (b) and (c).
Items
Capital Structure
Wet n Wild
Taronga Zoo
Jamberoo
Debt ($ million)
35
30
55
Ordinary shares ($ million)
65
70
45
TOTAL CAPITAL ($ million)
100
Debt (YTM)
7%
6.5%
8.00%
Ordinary Equity Beta
1.3
1.4
1.05
The risk-free rate is 4% and the market return is currently 8.5%. Further, Company Tax rate is 30%.
Required -
a. Calculate the cost of ordinary shares for each entity.
b. Calculate the after-tax cost of debt for each entity.
c. Calculate the weighted average cost of capital (WACC) for each entity's capital structure.
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