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Calculate the required return on the equity for cedar plc

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Reference no: EM132956353

Question - Cedar Plc is listed on the London Stock Exchange. It has 20 million ordinary shares in issue that have a market value of £2 per share, the company has just paid an annual dividend of 5p and expects dividends to grow at a rate of 4% per year. Cedar Plc also has 5 million preference shares in issue with the required return of 7% and a fixed dividend of 7p per year. Finally Cedar has 10-year, 7% coupon bonds in issue, the bonds have a total market value of £20 million and a yield to maturity of 6%.

a) Calculate the market value of the equity (ordinary shares) for Cedar Plc.

b) Calculate the required return on the equity for Cedar Plc.

c) Calculate the total market value of the preference shares of the company.

d) Calculate the weighted average cost of capital (WACC) for Cedar Plc.

Reference no: EM132956353

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