Calculate the cost of ordinary shares

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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) 40 35 4

Ordinary shares ($ million) 60 65 55

TOTAL CAPITAL ($ million) 100 100 100

Debt (YTM) 6.5% 7.5% 8.00%

Ordinary Equity Beta 1.25 1.10 1.20

The risk-free rate is 4% and the market return is currently 9%. Further, Company Tax rate is 30%.

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Required

a. Calculate the cost of ordinary shares for selected two entities (Wet n Wild and Jamberoo).

b. Calculate the after-tax cost of debt for the selected entities (Wet n Wild and Jamberoo).

C. Calculate the weighted average cost of capital (WACC) for selected entities (Wet n Wild and Jamberoo).

Reference no: EM132766787

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