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(Solution) Corporate Finance - Assignment

   

Added on  2021-04-21

9 Pages1061 Words26 Views
Running head: CORPORATE FINANCECorporate financeName of the studentName of the universityStudent IDAuthor note

1CORPORATE FINANCETable of ContentsAnswer a.....................................................................................................................................2Answer b....................................................................................................................................3Answer c.....................................................................................................................................5Answer d....................................................................................................................................7Reference....................................................................................................................................8

2CORPORATE FINANCEAnswer a.Value of shares = 30,000,000 * $ 42 = $ Determination of WACC (weighted average cost of capital) for CWCCost of equity –Ke = Rf + β (Rm – Rf) (Grüninger and Kind 2013)Where, Ke = cost of equityRf = Risk free rate = 3.5%Β = Beta = 2.639Rm = Market return = 12.52%Hence,Ke = 3.5 + 2.639 * (12.52 – 3.5) = 3.5 + 23.8038 = 27.3038%Therefore, Ke or cost of equity = 27.3038%Cost of bond –Annual interest rate = 10% * 2 = 20%Maturity = 20 yearsPresent value = 50,00,000 * $ 92.34 = $ 46,17,00,000

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