User Account

All Pages

Calculate the market value of each of the sources of capital

Assignment Help Financial Accounting
Reference no: EM132942715

Question - Following information is available about AOI Ltd. Statement of financial performance extract Liabilities 10% debentures ($100 par, coupon-annual) $11,000,000

Shareholders' funds

Ordinary shares ($1 par) $30,000,000

11% preference shares ($10 par) $6,000,000

Additional information

An interest payment in relation to the debentures has just been made, and the debentures mature four years from today. The market rate of interest on the debentures is 12%.

The preference shares are trading on the market at $10.00 each, and a dividend of 110¢ per share has just been paid.

Forecasts in relation to market returns are as follows: expected risk-free rate of return = 6%; expected return on the market portfolio = 16.50%; and the systematic risk of AOI's ordinary shares represented by its beta is 1.25. These shares are trading on the market at $2.50 each.

No company or personal taxes are levied.

The existing capital structure is unlikely to change.

Required -

(a) Calculate the market value of each of the sources of capital.

(b) Calculate the total market value of the firm.

(c) Calculate the weight/ proportion of each of the sources of capital to total market value of the firm.

(d) Calculate/determine the cost of each of the sources of capital.

(e) Find the weighted average cost of capital (WACC) of AOI Ltd based on the market values of the sources of capital.

Reference no: EM132942715

Questions Cloud

What is customs tariff act : 1. What is Customs Tariff Act? 2. What is excise tax act? 3. Explain SIMA.
At what date and how much will be paid for income tax : Assume the pay period ends on Friday 3rd July and the financial year ends on 30th June. At what date and how much will be paid for income tax
What is the return on equity for microsoft : the standard deviation of the S&P 500 is 20%, what is the correlation coefficient between returns on Microsoft and returns on S&P 500 index?
Why is the customer the most important : Why is the Customer the most important? Can you provide examples? Can you provide a reference?
Calculate the market value of each of the sources of capital : The preference shares are trading on the market at $10.00 each, and a dividend of 110¢ per share has just been paid. Calculate the market value of each
Pros and cons of obtaining fair market value : What do you see as the pros and cons of obtaining fair market value analyses on the compensation paid to physicians, especially when the market rates are benchm
What is organizational behaviour : 1. Define, what is Organizational Behaviour and state why it is importance to study Organizational Behaviour?
Explain the business income tax implications : What is the term and conditions that business is eligible for paying business income tax and why? Explain the business income tax implications
By how much should the scrap value need to change : By how much should the scrap value need to change for Turkish Airlines to be indifferent between accepting and rejecting the project

Reviews

Write a Review

Financial Accounting Questions & Answers

  Find what is the price of a european put option

What is the price of a European put option if the price of the equivalent call option is $3.00 and the share price, exercise price and risk-free rate are $4.00

  Make the appropriate journal entry to record the transaction

Make the appropriate journal entry to record the transaction. Acquired merchandise inventory costing $30,000 on January 21 with payment of $16,000 in cash

  What explicit statement is required in a set of ifrs

What explicit statement is required in a set of IFRS first-time adoption financial statements and explain whether and ABC, Inc. should present all of their statements of financial position using the new standard

  Calculate net sales gross profit income before taxes

During the year, cost of goods sold was $40,000; income from operations was $38,000; income tax expense was $8,000; interest expense was $6,000; and selling, general, and administrative expenses were $22,000.

  What role supervisors and middle managers should play

Explain what role supervisors and middle managers should play in the budgeting process. why companies prepare budgets for their profit centers

  Which the objectives of financial statements include

Which the objectives of financial statements include? Using accounting for decision support within the organization requires? personal financial planning

  How long must live after the day retired to come out ahead

Rock Solid will pay her $50,000 per year until she dies. The interest rate is 3%. How long must she live after the day she retired to come out ahead

  What was the balance of accumulated depreciation at june

Jacques Ltd purchased a computer for $5 000 on 1 July 2017. What was the balance of accumulated depreciation at 30 June 2019?

  Determine the estimated residual value to be used

Recommend the estimated equipment life to be used (however, use management's assumptions of a 15-year useful life when calculating depreciation expense)

  What are amounts of property plant and equipment purchased

Using the statement of cash flows, what are the amounts of property, plant, and equipment purchased in 2014 and 2013?

  What is the finance charge on the account

A firm has a $75,000 line of credit. The annual percentage rate is the current prime rate plus 4.5%. The balance on November 1 was $12,300. On November 7, the firm borrowed $16,700 to pay for merchandise, and on November 21 it borrowed another $8,800..

  What is impression of whole foods market inc annual report

What is your overall impression of Whole Foods Market, Inc.'s annual report? Is it a financial accounting document or a managerial accounting document?

Free Assignment Quote

Assured A++ Grade

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd