You have been provided with the following information regarding Strummer PLC Financial position statement as at 31st December K000 • Non-current Assets 33,344 • Current Assets 15,345 • Current Liabilities (9,679) • 5% bonds (redeemable in 6 years) (4,650) • 9% irredeemable bonds (8,500) • Bank Loan (3,260) 22,600 Ordinary shares (K1 par value) 6,400 8% preference shares (K1 par value) 9,000 Reserves 7,200 22,600 1. The current dividend, shortly to be paid, is K0.23 per share. Dividends in the future are expected to grow at a rate of 5% per year 2. Corporate tax currently stands at 30% 3. The interest rate on bank borrowings currently stand at 7% 4. Stock market prices as at 31st December (all ex-dividend or ex-interest) Ordinary shares K4.17 Preference shares K0.89 5% bonds K96 per K100 bond 9% irredeemable bonds K108 per K100 bond Required 1. Calculate the costs of the individual sources of finance 2. Calculate the book and market values of the individual sources of finance 3. calculate the company’s current weighted average cost of capital on a book value and market value basis
You have been provided with the following information regarding Strummer PLC
Financial position statement as at 31st December
K000
• Non-current Assets 33,344
• Current Assets 15,345
• Current Liabilities (9,679)
• 5% bonds (redeemable in 6 years) (4,650)
• 9% irredeemable bonds (8,500)
• Bank Loan (3,260)
22,600
Ordinary shares (K1 par value) 6,400
8%
Reserves 7,200
22,600
1. The current dividend, shortly to be paid, is K0.23 per share. Dividends in the future
are expected to grow at a rate of 5% per year
2. Corporate tax currently stands at 30%
3. The interest rate on bank borrowings currently stand at 7%
4. Stock market prices as at 31st December (all ex-dividend or ex-interest)
Ordinary shares K4.17
Preference shares K0.89
5% bonds K96 per K100 bond
9% irredeemable bonds K108 per K100 bond
Required
1. Calculate the costs of the individual sources of finance
2. Calculate the book and market values of the individual sources of finance
3. calculate the company’s current weighted average cost of capital on a book value
and market value basis
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