Sonique existing weighted average cost of capital

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Sonique Ltd's capital structure is as follows: Debt 35% Preference Shares

15%

Ordinary Share Capital

50%

The after-tax cost of debt is 7.5%; the cost of preference shares is 11%, and the cost of ordinary share equity is 13.5%. As an alternative to the existing capital structure for Sonique, an outside consultant has suggested the following modifications:

Debt

60%

Preference Shares

5%

Ordinary Share Capital

35%

Under this new and more debt-oriented arrangement, the after-tax cost of debt is 8.8%, the cost of preference shares is 11%, and the cost of equity is 15.6%.

Calculate Sonique's existing weighted average cost of capital (WACC). Your answer: a. %. Case sensitive: Type in 12.00 for 12.00%.
Recalculate Sonique's weighted average cost of capital (WACC), using the capital structure suggested by the outside consultant. Your answer: b. %. Case sensitive: Type in 12.00 for 12.00%.

Reference no: EM132537873

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