Suppose Your Company where you work as Finance Director is Financed by both debt (bonds) and equity (shares). In the Board Meeting, it was agreed that you needed to raise extra funds for capital Expenditure (Kn1 Million). Since your company is listed on the Lusaka Stock Exchange, you sold 400 worth of bonds at Kn1,000 each at 5% coupon rate (A total of Kn 400,000 raised). The company further issued stocks (shares) totaling 6,000 at Kn 100 each with an expected return of 6% (cost of equity). The company therefore managed to raise the required amount of Kn 1, 000,000 for the desired capital expenditure. Assume Corporate Tax Rate is 35%. REQUIRED: i) Explain in detail what is meant by the weighted average cost of capital (WACC) ii) Calculate the Weighted Average Cost of Capital (WACC) for your company. iii) What do you think are the major roles of a Corporate Finance Director in the ModernTimes
Question 1:
Suppose Your Company where you work as Finance Director is Financed by both debt (bonds) and equity (shares). In the Board Meeting, it was agreed that you needed to raise extra funds for capital Expenditure (Kn1 Million). Since your company is listed on the Lusaka Stock Exchange, you sold 400 worth of bonds at Kn1,000 each at 5% coupon rate (A total of Kn 400,000 raised). The company further issued stocks (shares) totaling 6,000 at Kn 100 each with an expected return of 6% (
Assume Corporate Tax Rate is 35%.
REQUIRED:
i) Explain in detail what is meant by the weighted average cost of capital (WACC)
ii) Calculate the Weighted Average Cost of Capital (WACC) for your company.
iii) What do you think are the major roles of a
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