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AdvTech Limited is a large firm listed on the Johannesburg Stock Exchange. It has the following capital structure:
Long Term Capital $ million
Convertible Debt - 5 yrs; 8% 25
Preferred Shares - 5% coupon + nominal value of 100 15
Common Equity (nominal value $ 10 per share) 10
Retained Earnings 23
The current dividend for the company is $ 50 per share and is expected to grow at 3% per year in the foreseeable future. The equity shares trade at $ 450 per share. The preferred shares trade at $ 104 per share. The convertible debt has a conversion privilege of 2 shares per $ 1 000 face value at maturity. The debt currently trades at $ 950. The firm's income tax rate is 30%
Required:
1.1 Calculate the firm's weighted average cost of capital (WACC).
1.2 Discuss the firm's dividend payout policy and whether it has an impact on share price.
1.3 Explain why the different sources of capital have different levels of risk and return.
Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..
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