Calculate the cost of ordinary equity for adp

Reference no: EM133610420

Question: ADP Corp. is financed by both debt and equity. The company has 15 million shares of ordinary equity outstanding. Currently selling for £35.50 per share. The ordinary equity has a beta of 1.09. They also have 900,000, 7% preference shares outstanding that currently sell for £48 per share. ADP has 300,000 bonds outstanding that are selling at par (£1,000). Equally risky bonds on the market are currently yielding 7.5%. The following information is also available. The government T-bill is currently yielding 6%, the rate of return on the market, R_m, is 10%, and the corporate tax rate is 24%.

Required:

Calculate the following:

a) The cost of ordinary equity for ADP

b) The cost of preference shares for ADP

c) The after-tax cost of debt for ADP

d) The weighted average cost of capital (WACC) for ADP

Reference no: EM133610420

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