Privately owned geological consultancy and research facility

Assignment Help Financial Management

Reference no: EM131576011

Geotech Consulting is a privately owned geological consultancy and research facility based in Hamilton. The company has been investigating a number of projects but has been unable to accurately calculate an appropriate benchmark rate for measuring these projects. You have been supplied with the following information and asked to calculate the weighted average cost of capital (WACC) for the company.

Geotech Consulting

Statement of Financial Position (extract from 30 June 2014 accounts)

Common Stock par value $2.00 4,000,000

14% Preference Shares par value $3.00 3,000,000

12% Bonds semi-annual (face value $100) 2,000,000

Term Loan 350,000

Mortgage loan 700,000

Additional Information:

The ordinary shares are currently trading at $2.86 while the Preference shares are trading at $3.15.

Return on government bonds is 4%, the market risk premium 6%. A consultant has estimated the company to have a beta of 1.3.

Corporate tax rate is 35%

The bonds originally had a 6 year term to maturity and were issued exactly two years ago and would be redeemed at par.

The before tax return on similar risk bonds is 9%

Interest on the term loan is 10% and the Mortgage is 9%.

Required;

Calculate the post-tax weighted average cost of capital for Geotech Consulting using the market valuation approach (show your workings).

Reference no: EM131576011

Questions Cloud

How many shares of stock will company have sell to recieve : How many shares of the stock will the company have sell to recieve the $25 million it needs?

Daily variance and daily standard deviation : Create a column of daily returns and compute the daily (arithmetic) average return, the daily variance, and the daily standard deviation.

Discuss effectiveness in the selection process : Pre-employment testing can be an effective tool in the selection of qualified candidates. Testing can include, but is not limited to the following areas

What are the equilibrium price and quantity : EconS 305 - Intermediate Microeconomics without Calculus Problems. What are the equilibrium price and quantity? Plot the supply and demand functions

Privately owned geological consultancy and research facility : Geotech Consulting is a privately owned geological consultancy and research facility based in Hamilton.

Define people-oriented and task-oriented leadership behavior : Consider your favorite teacher. What people-oriented and task-oriented leadership behaviors did he or she use effectively?

Ethical decision making model process to determine ethics : Is there anything unethical about this service in general, If so, who should be held accountable, the poster, the ultimate user (student), the professor

How do organizations financial affect accounting procedures : How do the organization's financial and strategic priorities affect accounting procedures and business decisions? How might that affect business success?

Demonstrate understanding of the field of social psychology : Demonstrate understanding of the field of social psychology as it applies to helping professions and management.

User Account

All Pages