Calculate weighted average cost of capital, Financial Management

Assignment Help:

Ocean Blue Vessels Ltd is a real Liner firm whose capital structure consists of debt, preference shares and equity shares. The company plans to raise further capital for its expansion plans. The company has issued 10 year, 45000, 10 % bonds five years back. The bond which was issued at a face value of Rs 100 is currently being sold at Rs 98.The company has issued 15,000   11% preference shares 3 years back with a redemption period of 10 years. The preference shares which have a face value of Rs100 are currently being sold at for Rs 102. The company is subject to a tax bracket of 25 %.

The company has also issued 70,000 equity shares of face value Rs 100 at the same time. The company prefers valuating its equity shares according to the Capital asset pricing mechanism. For evaluating the cost of equity the company finds it suitable to consider the market performance of past one year. The ocean blue's month end share price and the shipping index is as follows:

Month End Closing

Shipping Index

Share Prices

March

536.65

537.65

April

687.98

634.32

May

845.32

765.87

June

857.93

779.95

July

849.10

621.60

August

846.80

875.10

September

816.75

620.15

October

865.55

660.70

November

835.55

769.95

December

856.50

534.45

January

878.45

647.45

February

886.50

534.40

The risk free rate is 8 % and the market rate of return in shipping sector is 12%.

Suggest the management regarding the present weighted average cost of capital.


Related Discussions:- Calculate weighted average cost of capital

Constructing the theoretical spot rate curve for treasuries, The following ...

The following treasury issues can be included for the construction of the curve: On-the-run treasury issues. On-the-run treasury issues and sele

What is compound interest, What is compound interest? Compare compound inte...

What is compound interest? Compare compound interest to discounting. Compound interest takes place when interest is earned on interest and on the original principal of an inves

Terms of maturity date very short term, 1. (a) A barbell is a approach of...

1. (a) A barbell is a approach of maintaining a portfolio of securities concentrated at two extremes in terms of maturity date very short term and very long term. A positive

Evaluate accounting rate of return and net present value, Citilink has a bu...

Citilink has a business line currently owns and runs 350 sightseeing buses and has a turnover of $10 million per annum. The current system for allocating jobs to drivers is very i

Explain the time value of money, What is the time value of money? The m...

What is the time value of money? The meaning of time value of money is that money you hold in your hand today is worth much more than money you suppose to receive in the future

Types of mutual funds, Types of Mutual Funds The objectives of a Mutual...

Types of Mutual Funds The objectives of a Mutual Fund are as follows: To provide an opportunity for lower income groups to acquire property without much difficulty in the

How & why does working capital affect incremental cash flow, How and why do...

How and why does working capital affect the incremental cash flow estimation for a proposed large capital budgeting project?  Explain. Several large projects require additional

Estimate the companys wacc, Assemble all other inputs/assumptions based on ...

Assemble all other inputs/assumptions based on the past data. Use your best judgment to have the most reasonable estimates. Tasks 1. Prepare an Excel spreadsheet containi

Essential features of a sound capital mix, ESSENTIAL FEATURES OF A SOUND CA...

ESSENTIAL FEATURES OF A SOUND CAPITAL MIX A sound or an appropriate Capital structure should have the following essential features : highest possible use of leverage

Calculate the net present value and payback period, Sarkozy Ltd is consider...

Sarkozy Ltd is considering the selection of one of a pair of mutually exclusive investment projects. Both would involve purchase of machinery with a life of five years. Projec

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd