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Calculate the after-tax cost of the company bond and share

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Question - Corella Ltd. is mid-cap manufacturing company. Corella currently has bonds with a face value of $15 million which pay a half yearly coupon rate of 8% p.a. and will mature in four years. The market yield on these bonds is currently 8% p.a. Corella also has 10,000,000 ordinary shares on the market currently trading at $2.75 per share. The beta coefficient for the ordinary share is 1.2, return on the market is estimated to be 16% p.a. and the risk-free rate is 4% p.a. The company tax rate is 30%. (Please include all workings).  Calculate the after-tax cost of the company's bond and share. Calculate the weighted average cost of capital (WACC) of Corella Ltd.

Reference no: EM133005768

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