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You have been presented with the following information from Bogus Ltd. Source of Capital Book Value Market Value Before-tax cost Long-term debt R11 823 158 R7 389 474 8% Preference shares R118 232 R177 347 13% Ordinary shares R3 103 579 R8 867 368 17% Total R15 044 969 R16 434 189 Assume Bogus Ltd has an average tax rate of 27% Required: a) Calculate the WACC based on the book value weights. Round off answers to two decimal places b) Compare the book value and market value method of calculating the WACC.

You have been presented with the following information from Bogus Ltd. Source of Capital Book Value Market Value Before-tax cost Long-term debt R11 823 158 R7 389 474 8% Preference shares R118 232 R177 347 13% Ordinary shares R3 103 579 R8 867 368 17% Total R15 044 969 R16 434 189 Assume Bogus Ltd has an average tax rate of 27% Required: a) Calculate the WACC based on the book value weights. Round off answers to two decimal places b) Compare the book value and market value method of calculating the WACC.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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You have been presented with the following information from Bogus Ltd. Source of Capital Book Value Market Value Before-tax cost Long-term debt R11 823 158 R7 389 474 8% Preference shares R118 232 R177 347 13% Ordinary shares R3 103 579 R8 867 368 17% Total R15 044 969 R16 434 189 Assume Bogus Ltd has an average tax rate of 27% Required: a) Calculate the WACC based on the book value weights. Round off answers to two decimal places b) Compare the book value and market value method of calculating the WACC.
Transcribed Image Text:You have been presented with the following information from Bogus Ltd. Source of Capital Book Value Market Value Before-tax cost Long-term debt R11 823 158 R7 389 474 8% Preference shares R118 232 R177 347 13% Ordinary shares R3 103 579 R8 867 368 17% Total R15 044 969 R16 434 189 Assume Bogus Ltd has an average tax rate of 27% Required: a) Calculate the WACC based on the book value weights. Round off answers to two decimal places b) Compare the book value and market value method of calculating the WACC.
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