The current market price is R5.90 per share, and there are 3 million R4.20 ordinary shares in circulation. The most recent dividend was 83 cents, and the average increase over the previous six years has remained at 8%. The market value of the company's 1 750 000 R2.50, 9% preference shares is R3.80 per share. The face value of the company's publicly listed debt is R5 million. The debenture's current yield to maturity is 11%, while its coupon rate is 8%. The debenture will mature after seven years. Additionally, they have an R3 million bank overdraft that is due in 4 years, with interest paid at a rate of 16% annually. The business has a return on the market of sixteen percent, a beta of two and a risk-free rate of six percent. The company tax rate is 30%. 1. Calculate the weighted average cost of capital, using the the (Gordon Growth Model) dividend discount model to calculate the cost of equity. 2. Calculate the cost of equity, using the Capital Asset Pricing Model.
The current market price is R5.90 per share, and there are 3 million R4.20 ordinary shares in circulation.
The most recent dividend was 83 cents, and the average increase over the previous six years has remained at 8%.
The market value of the company's 1 750 000 R2.50, 9% preference shares is R3.80 per share.
The face value of the company's publicly listed debt is R5 million.
The debenture's current yield to maturity is 11%, while its coupon rate is 8%.
The debenture will mature after seven years.
Additionally, they have an R3 million bank overdraft that is due in 4 years, with interest paid at a rate of 16% annually.
The business has a return on the market of sixteen percent, a beta of two and a risk-free rate of six percent.
The company tax rate is 30%.
1. Calculate the weighted average cost of capital, using the the (Gordon Growth Model) dividend discount model to calculate the cost of equity.
2. Calculate the cost of equity, using the Capital Asset Pricing Model.
Step by step
Solved in 2 steps
