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Estimate the company cost of capital which can be applied

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Reference no: EM132959325

As at 30 June you obtain the following information for Sydney Ltd:

  • The estimated required rate of return on equity after company tax but before personal tax is 16.5%
  • The estimated cost of debt before tax is 9.24%
  • Net debt as at 30 June 2021 is $244m
  • The number of shares on issue is 231.mm
  • The share price of Sydney is 3.34
  • Assume that the effective tax rate on gross free cash flows is the current corporate tax rate (Base rate Entity) is 27.50%.

Problem 1: Estimate the company cost of capital which can be applied to free cash flows that have had the full rate of effective corporate tax applied them.

Reference no: EM132959325

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