Reference no: EM133006675
Question - Extract of balance sheet for Cardigan Ltd. as at 31 March 2021:
Equity Issued And Paid-Up Capital 000
75m 50c ordinary shares 37,500
9.5m $1 3.5% preference shares 9,500
Reserves and Retained Profits
Retained profits 11,000
Share premium reserve 13,800
General reserve 4,000
71,050
Debt
Mortgage 5,300
Debentures ($1000 each) 6,250
Bank overdraft 14,804
26,354
You also have the following additional information available to you as of today:
(i) The current market price of the firm's ordinary shares is $1.00.
(ii) The firm's preference shares are currently selling for 35 cents each.
(iii) The debentures will mature in 2 years. They have a coupon rate of 10% per annum.
(iv) If the company currently sought long-term finance it would have to pay interest rates of 12% per annum on debentures. An amount of $5,300,000 is owing on the mortgage and has 6 years remaining and was taken out at 12% current rates are 14%.
(v) The firm is currently paying 11% per annum on its bank overdraft loan.
(vi) Interest on debentures. mortgage and the bank overdraft is paid half-yearly.
(vii) The corporate tax rate is 50 %.
(viii) The estimated Beta of the company's ordinary shares is 1.
(ix) The current yield on a 10-year government bond is 12% per annum.
(x) The expected return on the market portfolio is 17% per annum.
REQUIRED -
(a) Identify the various items that need to be included in the capital base to calculate the WACC.
(b) Calculate the market value of the various items identified in (a), the value of the firm and the relative weight of each item in the firm's capital structure.
(c) Calculate the required after-tax rate of return of each item identified in (a).
(d) Calculate the firm's WACC.
|
Compare the quoted price with a bag of similar quality
: Visit the company's Web site and custom design a bag. Compare the quoted price with a bag of similar quality and features at a local store
|
|
What is the annual pension payment
: What is the annual pension payment to be used in computing the projected benefit obligation as of December 31, 2020
|
|
How much would MEG Ltd pay
: MEG made 5,000 copies and paid a total of $600 in January. In April, they paid $400 for 3,000 copies. How much would MEG Ltd pay
|
|
Differences between prevention and detection controls
: Explain the differences between prevention controls and detection controls. Provide two (2) examples of each which you expect to find retail organisation sales
|
|
Calculate the required after-tax rate of return
: The expected return on the market portfolio is 17% per annum. Calculate the required after-tax rate of return of each item identified in (a)
|
|
Pass the necessary consolidation journal entries
: Pass necessary consolidation journal entries and journal entries to record the non-controlling interest if the non-controlling interest in acquirer is measured
|
|
What is the variable cost per unit
: Asco Company has a relevant range of production between 15,000 and 30,000 units. If 16,000 units are produced, what is the variable cost per unit
|
|
What is the objective of financial statement analysis
: What is the objective of financial statement analysis? What are some of the tests of a sound or healthy long-term financial position
|
|
How much would GEM Ltd pay
: GEM made 5,000 copies and paid a total of $600 in January. In April, they paid $400 for 3,000 copies. How much would GEM Ltd pay
|