Reference no: EM132860633
Question - The following information relates to the Saturn Mining Corporation Ltd. Saturn has 100,000 bonds outstanding with a face value of $100 each, which have 3 years to maturity and pay an-annual 5% coupon. The yield on the bonds is 4% p.a. Saturn's marginal corporate tax rate is 30%.
Saturn has 3 million preference shares on issue, which are currently trading for $2.75 each, giving a total market value of $8.25 million. They pay an annual dividend of 10 cents.
Saturn has 7 million ordinary shares on issue, which are currently trading for $5.00 each, giving a total market value of $35 million. These shares are expected to pay an annual dividend of $0.50 next year, and this dividend is expected to grow at a constant rate of 2% in perpetuity.
Required -
a) What is the market value of Saturn's bonds?
b) What is Saturn's cost of preference shares?
c) What is Saturn's cost of ordinary shares?
d) What is Saturn's WACC?