Reuters PLC has the following capital structure: Ordinary shares - $0.70 Retained earnings 7000 4500 15% Preference shares at $0.50 9% $100 Redeemable Debentures 3000 3500 20% Bank loan 2000 Total funds employed 17000 The ordinary shares are quoted at $1.70 ex-div, the market price of the preference shares is $0.70 ex-div. Debenture stock is quoted at $67.95 ex-interest per $100 nominal and will be redeemable at par in exactly 5 years. Reuters PLC has a marginal rate of corporation tax of 25%. The current risk-free rate of return is 5%, the market rate of return is 10% and the company has an equity beta value of1.25.
Reuters PLC has the following capital structure: Ordinary shares - $0.70 Retained earnings 7000 4500 15% Preference shares at $0.50 9% $100 Redeemable Debentures 3000 3500 20% Bank loan 2000 Total funds employed 17000 The ordinary shares are quoted at $1.70 ex-div, the market price of the preference shares is $0.70 ex-div. Debenture stock is quoted at $67.95 ex-interest per $100 nominal and will be redeemable at par in exactly 5 years. Reuters PLC has a marginal rate of corporation tax of 25%. The current risk-free rate of return is 5%, the market rate of return is 10% and the company has an equity beta value of1.25.
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 WACC based on market values
Transcribed Image Text:Reuters PLC has the following capital structure:
Ordinary shares - $0.70
Retained earnings
|15% Preference shares at $0.50
7000
4500
3000
9% $100 Redeemable Debentures
3500
20% Bank loan
2000
Total funds employed
17000
The ordinary shares are quoted at $1.70 ex div, the market price of the preference shares is $0.70
ex div. Debenture stock is quoted at $67.95 ex-interest per $100 nominal and will be redeemable at
par in exactly 5 years.
Reuters PLC has a marginal rate of corporation tax of 25%. The current risk-free rate of return is 5%,
the market rate of return is 10% and the company has an equity beta value of 1.25.
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