are given the following information about Jordan plc: Financial position statement at January 2017 £000 £000 Non-current assets 1,511 Current assets 672 Total assets 2,183 Equity finance Ordinary shares (50p) 200 Reserves 150 Non-current liabilities 7% preference shares 300 9% bonds (redeemable after 8 years) 650 9% bank notes 560 Current liabilities 323 Total liabilities 2183 You are also given the following information: • Yield on Treasury bills 7% • Jordan plc equity beta 1.21 • Equity risk premium 9.1% • Current ex-div ordinary share price £2.35 • Current ex-div preference share price 66p • Current ex-interest bond price £105 • Corporate tax rate 30% Required: (a). calculate the company’s weighted average cost of capital (WACC) using market weightings. (b). critically discuss whether you consider that companies, by integrating a sensible level of gearing into their capital structure, can minimise their weighted average cost of capital.
are given the following information about Jordan plc:
Financial position statement at January 2017
£000 £000
Non-current assets 1,511
Current assets 672
Total assets 2,183
Equity finance
Ordinary shares (50p) 200
Reserves 150
Non-current liabilities
7% preference shares 300
9% bonds (redeemable after 8 years) 650
9% bank notes 560
Current liabilities 323
Total liabilities 2183
You are also given the following information:
• Yield on Treasury bills 7%
• Jordan plc equity beta 1.21
• Equity risk premium 9.1%
• Current ex-div ordinary share price £2.35
• Current ex-div
• Current ex-interest
• Corporate tax rate 30%
Required:
(a). calculate the company’s weighted average cost of capital (WACC) using market weightings.
(b). critically discuss whether you consider that companies, by integrating a sensible level of gearing
into their capital structure, can minimise their weighted average cost of capital.
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