essaynest EssayNest

Very Ltd. has the following capital structure: • 1 million ordinary shares with a current market…

Get your original paper written from scratch starting at just $10 per page with a plagiarism report and free revisions included!

4.8

rating

SiteJabber

4.9

rating

ResellerRatings

4.9

rating

Reviews.io

Hire A Writer
Very Ltd. has the following capital structure:
• 1 million ordinary shares with a current market value of $48 per share
• 200,000, $100 par value, 6% preferred shares with a current market value of $80 per share
• 40,000, $1,000 par (face) value bonds with semi-annual coupon payments of $40 per bond.
Additional information:
• Very Ltd’s ordinary shares have an estimated beta (ß) of 1.3.
• Very Ltd’s bonds have 7 years to maturity and sell for 90 per cent of their par (face) value.
• The risk free rate of interest is 7 percent;
• The market risk premium is 8 percent
• The company income tax rate is 30 percent.
Required
(a) Calculate Very Ltd’s weighted average cost of capital (WACC)
(b) Briefly describe the purpose of calculating the WACC.

Get your paper done by an expert.