Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Santam wants to determine its cost of capital. The company is financed through bonds and ordinary shares. The bonds were issued five years ago at a par value of R100 (total funds raised R5 million). They carry an annual coupon of 12 per cent, are due to be redeemed in four years and are currently trading at R110. The company’s shares have a market value of R4 million, the return on risk-free government securities is 9 per cent and the risk premium for an average-risk share has been 6 per cent. Santam’s shares have a lower than average risk and its historic beta, as measured by the co-movement of its shares and the market index, correctly reflects the risk adjustment necessary to the average risk premium – this is 0.90. The corporate tax rate is 30 per cent. Santam has a net asset figure of R3.5 million showing in its statement of financial position.
Required:
1) Calculate the cost of debt capital.
2) Calculate the cost of equity capital.
3) Calculate the weighted average cost of capital.
4) Should Santam use the WACC for all future projects and SBUs? Explain your answer.
What is the difference between Vertical and Horizontal Mergers? What are synergies in a merger?
Explain how slower inventory turns, slower receivables collections, or faster payments to suppliers would influence the numbers produced by a cash budget.
What must the coupon rate be on the bonds?
Which one of these formulas is used to estimate a firm's growth rate? The total return on a stock is equal to.
Explain how rapidly expanding sales can drain the cash resources of a firm and discuss the relative volatility of short- and long-term interest rates.
Cost of Equity with and without Flotation Javits & Sons' common stock currently trades at $28.00 a share. It is expected to pay an annual dividend of $1.00 a share at the end of the year (D1 = $1.00), and the constant growth rate is 3% a year. What i..
Suppose that you are the sole owner of an all-equity firm, the assets of which are worth $500,000. The ROA is 15% per year paid as a dividend to you. What will your return on equity be in the year after you go into debt?
calculate the weighted average cost for the Ban Corp.
Assume that you own 200 shares of Duke Power (DUK)), which you bought for $64.00. You want to increase your return on this investment, but unwilling to take on any unnecessary risk. Which option strategy would you pursue? Be specific, thus I want you..
Compared with other industries, how 'risky' is healthcare to other people who may be ready to lend monies to a healthcare organization or to those who wish to invest monies in a healthcare organization? What makes healthcare a risky or non-risky indu..
We are evaluating a project that costs $848,000, has an eight-year life, and has no salvage value. Calculate the best-case and worst-case.
What is a lower bound for the price of a 2-month European put option on a nondividend-paying stock when the stock price is $58, the strike price is $65, and the riskfree interest rate is 5% per annum?
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd