Reference no: EM132583820

You have been hired by Omnic Enterprises, an electronics manufacturer, to assist in determiningtheir cost of capital for capital budgeting decisions. Two years ago, the company issued 2,000 5-year bonds with a face value of $1 million each. The bonds pay a semi-annual coupon of 5% p.a. and are currently trading at a yield of 4.2% p.a. with semi-annual compounding. Omnic's equity capital consists of 168 million ordinary shares, which are trading at $25 per share, and 55 million preference shares, which are trading at $18 per share. The ordinary shares have a beta of 1.4 and the preference shares pay an annual dividend of $0.90. Answer the following questions, given that the expected return on the market portfolio is 9% p.a., the risk free interest rate is 2% p.a., and the corporate tax rate is 30%.

Question 1: What is the market value of omnic debt?

Question 2: What is the cost of equity for omnic ordinary shares?

Question 3: What is the cost of equity for omnic preference shares?

Question 4: What is omnic wacc?