Question
In: Finance
The capital structure of Minelli Enterprises Limited as at 31 March 2020 is as follows: $’000...
The capital structure of Minelli Enterprises Limited as at 31
March 2020 is as follows:
$’000
Ordinary shares (par value $1.50)
60,000
5.5% (post-tax) Preference Shares (par value $2.20)
8,800
6.5% (pre-tax) Bonds semi-annual (par value $1000)
80,000
Term Loan (interest rate 4.25% per annum)
6,500
Additional Information:
• The ordinary shares are currently trading at $1.95 while the
preference shares are trading at $2.45.
• Return on government bonds is 1.25%, the market risk premium
4.25%. A consultant has estimated the company to have a beta of
1.30.
• The company tax rate is 28%
• The bonds initially had a 5-year term to maturity and were issued
exactly three years ago and would be redeemed at par.
• The current market value of the bond is $ 955.
Calculate the post-tax weighted average cost of capital (WACC) for Minelli Enterprises Ltd using the market valuation approach (show all workings).
Solutions
jeff jeffy answered 2 years agoRelated Solutions
The capital structure of Minelli Enterprises Limited as at 31 March 2020 is as follows: -Ordinary...
The capital structure of Minelli Enterprises Limited as
at 31 March 2020 is as follows:
-Ordinary shares (par value $1.50) 60,000
5.5% (post-tax) Preference Shares (par value $2.20)
8,800
6.5% (pre-tax) Bonds semi-annual (par value
$1000)
80,000 Term Loan (interest rate 4.25% per annum)
6,500
Additional Information:
• The ordinary shares are currently trading at $1.95 while the
preference shares are trading at $2.45.
• Return on government bonds is 1.25%, the market risk premium
4.25%. A consultant has estimated...
Question 2 Weighted Average Cost of Capital (15 marks) The capital structure of Minelli Enterprises Limited...
Question 2 Weighted Average Cost of Capital
The capital structure of Minelli Enterprises Limited as at 31
March 2020 is as follows: $’000
Ordinary shares (par value $1.50) 60,000
5.5% (post-tax) Preference Shares (par value $2.20) 8,800
6.5% (pre-tax) Bonds semi-annual (par value $1000) 80,000
Term Loan (interest rate 4.25% per annum) 6,500
Additional Information:
• The ordinary shares are currently trading at $1.95 while the
preference shares are trading at $2.45.
• Return on government bonds is 1.25%, the...
Question 2 Weighted Average Cost of Capital (15 marks) The capital structure of Minelli Enterprises Limited...
Question 2
Weighted Average Cost of Capital
The capital structure of Minelli Enterprises Limited as at 31
March 2020 is as follows: $’000
Ordinary shares (par value $1.50) 60,000 5.5%
(post-tax) Preference Shares (par value $2.20) 8,800 6.5%
(pre-tax) Bonds semi-annual (par value $1000) 80,000
Term Loan (interest rate 4.25% per annum) 6,500
Additional Information:
• The ordinary shares are currently trading at $1.95 while the
preference shares are trading at $2.45.
• Return on government bonds is 1.25%, the...
The following trial balance relates to Atlop Sdn Bhd at 31 March 2020 : RM’000 RM’000...
The following trial balance relates to Atlop Sdn Bhd at 31 March
2020 :
RM’000
RM’000
Ordinary share @ RM0.50 per share
70,000
Retained profit at 1 April 2019
11,200
Land and building at cost (land RM100milion)
60,000
(note i)
Plant and equipment at cost (note i)
94,500
Accumulated depreciation at 1 April 2019 :
-
Building
20,000
-
Plant and equipment
24,500
Inventories at 31 March 2020
43,700
Trade receivables
42,200
Bank
6,800
Deferred tax (note ii)
6,200
Trade...
Assume that you provide financial advice to Minelli Enterprises Limited. The company’s management has come to...
Assume that you provide financial advice to Minelli Enterprises
Limited. The company’s management has come to you for guidance over
a foreign exchange transaction. The company, based in New Zealand,
has sold GBP$ 4,500,000 worth of equipment to a customer in Great
Britain. The payment has been deferred for six (06) months. The
following information has been provided:
Spot exchange rate = NZD 1.9639/GBP
Six-month forward rate = NZD 1.9613/GBP
New Zealand lending rate = 3.12% p.a.
New Zealand deposit...
Question 1: Assume that you provide financial advice to Minelli Enterprises Limited. The company’s management has...
Question 1:
Assume that you provide financial advice to Minelli Enterprises
Limited. The company’s management has come to you for guidance over
a foreign exchange transaction. The company, based in New Zealand,
has sold GBP$ 4,500,000 worth of equipment to a customer in Great
Britain. The payment has been deferred for six (06) months. The
following information has been provided:
Spot exchange rate = NZD 1.9639/GBP
Six-month forward rate = NZD 1.9613/GBP
New Zealand lending rate = 3.12% p.a.
New...
Extract from the ledger of Casper Limited on 30 June 2020: R Capital: Bruce 400 000...
Extract from the ledger of Casper Limited on 30 June 2020:
R
Capital: Bruce 400 000
Capital: Lee 300 000
Current a/c: Bruce (01 July 2019) 45 000 CR
Current a/c: Lee (01 July 2019) 42 000 DR
Drawings: Bruce 95 000
Drawings: Lee 110 000
The following must be taken into account:
1. On 30 June 2020 the Profit and Loss account reflected a net
profit of R940 000.
2. Partners are entitled to interest at 14% p.a. on...
Operating results for Triton Entertainment Limited for the year ended May 31, 2020 are as follows:...
Operating results for Triton Entertainment Limited for the
year ended May 31, 2020 are as follows:
Sales $4,180,000
Operating income 623,700
Average operating assets 1,980,000
Minimum required rate of return 20%
Required: Consider the following questions independently.
Carry out all calculations to two decimal places.
A. Compute Triton’s ROI and residual income.
B. Assume that the manager of Triton can increase sales by
$350,000 and as a result operating income will increase by $60,000
without any increase in operating assets....
Operating results for Triton Entertainment Limited for the year ended May 31, 2020 are as follows:...
Operating results for Triton Entertainment Limited for the
year ended May 31, 2020 are as follows:
Sales $4,180,000
Operating income 623,700
Average operating assets 1,980,000
Minimum required rate of return 20%
Required: Consider the following questions independently.
Carry out all calculations to two decimal places.
A. Compute Triton’s ROI and residual income.
B. Assume that the manager of Triton can increase sales by
$350,000 and as a result operating income will increase by $60,000
without any increase in operating assets....
The information that follows relates to equipment owned by Pearl Limited at December 31, 2020: Cost...
The information that follows relates to equipment owned by
Pearl Limited at December 31, 2020:
Cost
$8,280,000
Accumulated depreciation to date
920,000
Expected future net cash flows (undiscounted)
6,440,000
Expected future net cash flows (discounted, value in use)
5,842,000
Fair value
5,704,000
Costs to sell (costs of disposal)
46,000
At December 31, 2020, Pearl discontinues use of the equipment and
intends to dispose of it in the coming year by selling it to a
competitor. It is expected that the...
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