Question
In: Finance
Fancy furniture LTD is a company that produces high-quality custom furniture for commercial and residential customers....
Fancy furniture LTD is a company that produces high-quality custom furniture for commercial and residential customers. You have been asked to calculated the WACC for this company and are given the following information;
- Fancy furniture ltd is a publicly listed company and it currently has 20 million ordinary shares on issue. The beta of its share is 1.7
- FF is forecasting to pay a dividend of $0.8 in the coming year and the dividend is expected to grow at a rate of 5% per annum.
- Government bonds are currently trading at 4% per annum and the market risk premium is 7%
- The firm has 2 million preference shares outstanding with a current market price at $90 per share. The par value of the preference shares is $100. Preference shares pay a constant dividend of $4.5 per year.
- Five years ago, FF took out a 20 year long-term loan, with an initial value of $1 million, with its bank for a mortgage of a new storage warehouse. The cost of this loan is 6% per annum, assumed to be paid annually (at the end of each year)
- The company has a short term loan of $0.5 million on the balance sheet. The cost of this loan is 4.7% per annum .
- The company’s debentures are publicly traded and their market price equals to 93% of the face value. The debentures pay coupons semi-annually. The book value of the debenture is $3 million and the current yield to maturity of a corporate debenture is 12% per annum
a) calculate the cost of equity
b) calculate the current price for ordinary share
c) calculate the discount rate for preference share
d) calculate the market value of the long term loan
e) calculate the market value of the short term loan
F) calculate the market value of debentures
G) what is the total market value of equity
H) what is the total market value of debt
I) calculate the overall cost of debt of the company (before tax)
J) calculate the overall cost of equity
Solutions
Expert Solution
Answer) Please Find attached screenshots. Since any particular question have not been asked, i have answer the 1st four questions.
Good luck!
jeff jeffy answered 1 year agoRelated Solutions
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