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What is twc ltd cost of preference shares

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Reference no: EM132681592

The following information relates to Trump Wall Constructions Ltd (referred to as "TWC Ltd"):

  • TWC Ltd has 30,000 bonds outstanding with a face value and price of $1000 each, which have 10 years to maturity and pay an-annual 5% coupon. The yield on the bonds is 6% p.a. TWC Ltd's marginal corporate tax rate is 30%.
  • TWC Ltd has 5 million preference shares on issue, which are currently trading for $5.00 each, giving a total market value of $25 million. They pay an annual dividend of 80 cents.
  • TWC Ltd has 10 million ordinary shares on issue, which are currently trading for $6.00 each, giving a total market value of $60 million. The beta of these shares is 1.2, the risk-free rate of return is 3% and the market risk premium is 6%.

Part A, B and C

Answer the following questions in the space provided below:

a. What is TWC Ltd's cost of preference shares?

b. What is TWC Ltd's cost of ordinary shares?

c. What is TWC Ltd's weighted average cost of capital (WACC)?

Reference no: EM132681592

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