Homework Helper

Not Rated (0)

$17/per page/

About Homework Helper

Levels Tought:
Elementary,Middle School,High School,College,University,PHD

Expertise:
Accounting,Applied Sciences See all
Accounting,Applied Sciences,Art & Design,Chemistry,Economics,Essay writing Hide all
Teaching Since: Apr 2017
Last Sign in: 419 Weeks Ago, 3 Days Ago
Questions Answered: 3232
Tutorials Posted: 3232

Education

  • MBA,MCS,M.phil
    Devry University
    Jan-2008 - Jan-2011

  • MBA,MCS,M.Phil
    Devry University
    Feb-2000 - Jan-2004

Experience

  • Regional Manager
    Abercrombie & Fitch.
    Mar-2005 - Nov-2010

  • Regional Manager
    Abercrombie & Fitch.
    Jan-2005 - Jan-2008

Category > Business & Finance Posted 05 Jun 2017 My Price 12.00

Celtor plc is a property development company operating in the London area.

Celtor plc is a property development company operating in the London area. The company has the following capital structure as at 30 November 1993:

 

 

 

£000

£1 ordinary shares

10,000

Retained p r ofit

20,000

9% debentu r es

12,000
 

42,000

 

The equity shares have a current market value of £3.90 per share and the current level of dividend is 20 pence per share. The dividend has been growing at a compound rate of 4 per cent per annum in recent years. The deben- tures of the company are irredeemable and have a current market value of £80 per £100 nominal. Interest due on the debentures at the year end has recently been paid.

The company has obtained planning permission to build a new office block in a redevelopment area. The com- pany wishes to raise the whole of the finance necessary for the project by the issue of more irredeemable 9 per cent debentures at £80 per £100 nominal. This is in line with a target capital structure set by the company where the amount of debt capital will increase to 70 per cent of equity within the next two years.

The rate of corporation tax is 25 per cent.

 

Required

(a) Explain what is meant by the term ‘cost of capital’. Why is it important for a company to calculate its cost of capital correctly?

(b) What a r e the main factors which determine the cost of capital of a company?

(c) Calculate the weighted average cost of capital of Celtor plc which should be used for futu r e investment

decisions

Answers

Homework Helper
Not Rated (0)
Status NEW Posted 05 Jun 2017 09:06 AM My Price 12.00

Hel-----------lo -----------Sir-----------/Ma-----------dam----------- T-----------han-----------k Y-----------ou -----------for----------- us-----------ing----------- ou-----------r w-----------ebs-----------ite----------- an-----------d a-----------cqu-----------isi-----------tio-----------n o-----------f m-----------y p-----------ost-----------ed -----------sol-----------uti-----------on.----------- Pl-----------eas-----------e p-----------ing----------- me----------- on----------- ch-----------at -----------I a-----------m o-----------nli-----------ne -----------or -----------inb-----------ox -----------me -----------a m-----------ess-----------age----------- I -----------wil-----------l

Not Rated(0)