Calculate the weighted average cost of capital of company

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Reference no: EM132066466

The following information was available from the Namibian Stock Exchange (NSX) and the past and forecast financial statements of Wooltru Plc.

2013 2014 2015 2016

Dividend per share N$0.60 N$0.63 N$0.65 N$0.6955

200 000 Ordinary shares of N$1 each N$200 000 Nominal value

6% Preference shares N$5 each N$2 000 000 Nominal value

7% Mortgage bond N$3 000 000 Nominal Value

Additional Information

1. The Namibian Government 3-months Treasury bill currently pays 6.5% and does not change with time.

2. The equity beta of the company is 1.6 while the return on an average asset is 13.5%.

3. From 2016, dividends shall grow constantly forever at a rate equal to the growth in dividends from 2015 to 2016.

4. Preference shares are perpetual and have a required return of 8%.

5. The bond’s yield to maturity is 6% and it matures in 10 years time. The bond also pays interest twice annually.

6. The tax rate is 28%.

Required:

Calculate the weighted average cost of capital (WACC) of the company.

Reference no: EM132066466

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