Bella Traders uses a combination of shares and debt in their capital structure. The details are given below: There are 12 000 000 R6 ordinary shares in issue and the current market price is R11 per share. The latest dividend paid was R1.62 and a 11% average growth for the past six years was maintained. The company has 5 200 000 R6, 12% preference shares with a market price of R7.80 per share. Bella Traders has a public traded debt with a face value of R17 000 000. The coupon rate of the debenture is 11% and the current yield to maturity of 16%. The debenture has 5 years to maturity. They also have a bank overdraft of R7 000 000 due in 4 years' time and interest is charged at 16% per annum. Additional Information: 1. Bella Traders has a beta of 2.1, a risk-free rate of 8.9% and a return on the market of 17.3%. 2. Company tax rate is 28%. 1.1 Calculate the weighted average cost of capital, using the Gordon Growth Model to calculate the cost of equity.
Bella Traders uses a combination of shares and debt in their capital structure. The details are given below: There are 12 000 000 R6 ordinary shares in issue and the current market price is R11 per share. The latest dividend paid was R1.62 and a 11% average growth for the past six years was maintained. The company has 5 200 000 R6, 12% preference shares with a market price of R7.80 per share. Bella Traders has a public traded debt with a face value of R17 000 000. The coupon rate of the debenture is 11% and the current yield to maturity of 16%. The debenture has 5 years to maturity. They also have a bank overdraft of R7 000 000 due in 4 years' time and interest is charged at 16% per annum. Additional Information: 1. Bella Traders has a beta of 2.1, a risk-free rate of 8.9% and a return on the market of 17.3%. 2. Company tax rate is 28%. 1.1 Calculate the weighted average cost of capital, using the Gordon Growth Model to calculate the cost of equity.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Calculate weighted average for Bella traders.
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22 March 2023 at 23:59
Bella Traders uses a combination of shares and
debt in their capital structure. The details are
given below: There are 12 000 000 R6 ordinary
shares in issue and the current market price is
R11 per share.
The latest dividend paid was R1.62 and a 11%
average growth for the past six years was
maintained. The company has 5 200 000 R6,
12% preference shares with a market price of
R7.80 per share. Bella Traders has a public
traded debt with a face value of R17 000 000.
The coupon rate of the debenture is 11% and the
current yield to maturity of 16%. The debenture
has 5 years to maturity. They also have a bank
overdraft of R7 000 000 due in 4 years' time and
interest is charged at 16% per annum. Additional
Information:
1. Bella Traders has a beta of 2.1, a risk-free rate
of 8.9% and a return on the market of 17.3%. 2.
Company tax rate is 28%. 1.1 Calculate the
weighted average cost of capital, using the
Gordon Growth Model to calculate the cost of
equity.
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