Exercise 4 (it's only one question) In 2016 the company FinTech.Inc had a capital structure which is as follows: Capital structure Book value Long-term bank debt $2,000,000 Bond loan $5,000,000 Preferred shares NV=$70 $7,000,000 Ordinary actions 200,000 shares $10,000,000 Non-distributed profit $3,000,000 The annual interest rate of the bank debt is 6%, the company issued its bond loan by offering a nominal annual coupon rate pf 8%, the maturity date is scheduled in 15 years, the bond currently being exchanged on the bond market at a price of $1,260, the issuance of a new bond loan at the market price with a 15 years maturity will gnerate deductible issue costs of 3%of the nominal value of the bond. The common share is currently trading on the stock market at a price of $65, an issue of shares at market price will cost 2% of the sale price in issue costs which are tax deductible, the next dividend is estimated at $2.2 the dividend growth rate is 5%, the company only redistributes 35% of its profits as dividends. The preferred shares trade at $80 each, their face value is $70, they offer an annual dividend of $6.3 per share, a new issue of preferred shares requires the payment of an issue fee of 10% of the face value of the preferred shares, the expenses are tax deductible. The tax rate is 40% Calculate the weighted average cost of capital before and beyond the breakout
Exercise 4 (it's only one question)
In 2016 the company FinTech.Inc had a capital structure which is as follows:
| Capital structure | Book value |
| Long-term bank debt | $2,000,000 |
| Bond loan | $5,000,000 |
| $7,000,000 | |
| Ordinary actions 200,000 shares | $10,000,000 |
| Non-distributed profit | $3,000,000 |
The annual interest rate of the bank debt is 6%, the company issued its bond loan by offering a nominal annual coupon rate pf 8%, the maturity date is scheduled in 15 years, the bond currently being exchanged on the bond market at a price of $1,260, the issuance of a new bond loan at the market price with a 15 years maturity will gnerate deductible issue costs of 3%of the nominal
The common share is currently trading on the stock market at a price of $65, an issue of shares at market price will cost 2% of the sale price in issue costs which are tax deductible, the next dividend is estimated at $2.2 the
The tax rate is 40%
Calculate the weighted average cost of capital before and beyond the breakout
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