What is ADC cost of ordinary shares

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The company Camisetas has debt claims of €400 (market value) and equity claims of €600 (market value).

A1. Calculate the WACC if the cost of debt financing (after tax) is 11 per cent and the cost of equity is 17 per cent.A2. The company Camisetas is financed with 60 per cent debt and 40 per cent equity. The current cost of debt financing is 11 per cent but due to a recent downgrade by the rating agencies, the firm's cost of debt is expected to increase to 12 per cent immediately. How will this change the firm's weighted average cost of capital if you ignore taxes?

B1. The return of Company B ordinary shares reacts to macroeconomic information is 1.6 times than the return of the market. If the risk-free rate of return is 4 per cent and market risk premium is 6 percent, what is ADC's cost of ordinary shares?

B2. The Company A has a preference shares issue outstanding that pays an annual dividend of USD1.30 per year. The current cost of preference shares for Company A is 9 per cent. If Company A issues additional preference shares that pay the same dividend and the investment banker retains 8 per cent of the sale price, what is the cost of new preference shares for Company A?

Reference no: EM133061080

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