Required: a) Calculate the WACC for the company without taking into consideration the expansion plan mentioned above, which means using the original Balance sheet figures. Also, the dividend payment for common stock is 8% and Preferred stock is 5%.
Required: a) Calculate the WACC for the company without taking into consideration the expansion plan mentioned above, which means using the original Balance sheet figures. Also, the dividend payment for common stock is 8% and Preferred stock is 5%.
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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The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
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Transcribed Image Text:The Management of "Tanjung Uda Berhad" is planning a RM4,000,000 expansion this
year. The expansion can be financed by issuing either common shares of bonds. The
new common share can be sold for RM$5 per share. The bonds can be issued with a 12%
coupon rates. The firm's existing preference share pay dividends of RM$2 per share.
The company's corporate income tax is 30%. The financial statement of Tanjung Uda
Berhad is as follow:-
Current Assets
Fixed Assets
Current Liabilities
Bonds:
(8.5%, RM1,000 par value)
(9%, RM1,000 par Value)
Preference Shares
(RM$ 100 par value)
Ordinary Shares
(RM$ 2 par value)
Retained Earnings
Tanjung Uda
Berhade
Balance Sheet as at 31st
December 2022
RM$ 2,000,000+
RM$ 8,000,000+
RM$ 10,000,000
RM$ 1,500,000
RM$ 4,000,000
RM$ 1,000,000+
RM$ 500,000+
RM$ 2,400,000+
RM$ 600,000+
RM$ 10,000,000+
Required:
a) Calculate the WACC for the company without taking into consideration the
expansion plan mentioned above, which means using the original Balance
sheet figures. Also, the dividend payment for common stock is 8% and
Preferred stock is 5%.<
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