Calculate the capital structure weights

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Question - XYZ Corporation has 45,000 ordinary shares outstanding which are currently selling for $110 per share. The number of preference shares outstanding is 30,000 and the book value of a share is $100 while the market value is $105. The company has issued 2,500 bonds with a face value of $1000. The market value of the bond is higher than the face value and it is $1,100. The required rate of return of ordinary shareholders, preference shareholders and bond holders are 10%, 12% and 15% respectively.

The Company is subject to 30% corporate tax.

Based on the information given;

i. Calculate the market value of the firm.

ii. Calculate the capital structure weights.

iii. Calculate the weighted average cost of capital (WACC) of the company.

Reference no: EM132570012

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