Question
In: Finance
Bernie Ltd is considering the purchase of a new equipment for its manufacturing plant and has...
Bernie Ltd is considering the purchase of a new equipment for its manufacturing plant and has asked you to work out an appropriate discount rate to use when evaluating the project.
information about burnie’s current capital structure is as follows:
Source of capital. Book value. Market value
debts. $1,500,000. $1,600,000
ordinary share capital. $1,800,000. $3,000,000
total. $3,300,000. $3,600,000
to finance the purchase, Bernie can sell 10 year-bonds paying annual coupon interest at a rate of 6%. The bond can be sold at par.
ordinary shares of Telstra are currently selling at $20.4. The company paid a dividend of $2.00 this year and dividends are expected to growth by an average of 2% per year for the indefinite future.
the current company’s tax rate is 30%.
Solutions
Expert Solution
We can evaluate the project we can use WACC method. ie, Weighted Average Cost of Capital Method..
The calculation has been uploaded below. please find the attachment
jeff jeffy answered 1 year agoRelated Solutions
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