Reference no: EM133020961

Question - Here is the capital structure of a company:

Loans

- Loan of $ 12 million at 7.8% nominal interest capitalized monthly;

- Loan of $ 5 million at 12% annual interest;

Obligations

- Issue of 10,500 bonds with a nominal value of $ 1,000, with a maturity of 30 years, at a coupon rate of 8% (interest payments are semi-annual (every 6 months)) and involving fees 4% emission;

Shares issued:

Ordinary: - 250,000 shares issued at $ 35 / share and paying an annual dividend of $ 1.10 per share;

Expected annual dividend growth of 10%;

Profits not distributed: $10,000,000 recorded on the company's balance sheet;

The corporate tax rate is 40%;

Required -

A) Determine the weighted average cost of capital of the company (WACC)?

The company wishes to obtain new capital and is considering a new issue of common shares for an amount totaling $ 5,040,000 at a price of $ 35 / share. The expected issue costs are $ 432,000;

B) Determine the new weighted average cost of capital (WACC) of the company after issuance of common shares?