Strategic and Financial Decision Making Assignment

Added on - Dec 2020

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STRATEGIC ANDFINANCIAL DECISIONMAKING
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1Measuring weighted average cost of capital of Goodway Plc...............................................1TASK 2............................................................................................................................................3TASK 3............................................................................................................................................4A. Measuring CAPM..............................................................................................................4B. Measuring the WACC for Noggin Plc:..............................................................................5TASK 4............................................................................................................................................6TASK 5............................................................................................................................................8CONCLUSION..............................................................................................................................10REFERENCES..............................................................................................................................11
INTRODUCTIONThe development of suitable decision which will be helpful in improving the operationalability as well as better financial administration in organisation. Goodway Plc is a holdingcorporation which deals in the marketable security the managerial concern is to improve equityand capital structure of firm. Similarly, as to have appropriate development of strategies therewill be consideration of various measurement such as cost of capital, CAPM and WACC are themajor factors which will be helpful to make proper improvements in business viabilities.Moreover, the directors of this organisation will be suggested as to make satisfactory changesinto operations as well as managing financial operations.TASK 1Measuring weighted average cost of capital of Goodway PlcTo analyse the weighted average cost of capital there is need to have appropriateestimation of costs implemented in each business operations. However, it brings the appropriateinformation and details relevant with the debts and equity of the business which will be used incontext with improving the capital structure of the firm(Pollanen and et.al., 2017). Similarly, toanalyse the cost of capital of Goodway Plc there will be analysis based on various capitaltreatment as listed below:Cost of preference share capital::ParticularsDetailsPreferred Stock Price25P Shares O/S8000000Market Value (P)200000000Dividend on preferred stock11.4Cost of Preferred Stock46%Cost of debt for 3% irredeemable loan stockParticularsDetailsFace Value of Bond31.6Bonds O/S1400000Coupon Rate0.03Market Price of Bond100Coupon0.948Market Value1400000001
Maturity (Years)10Corporate Tax Rate0.35Cost of Debt before tax74.3%Cost of Debt after tax48.30%Cost of 9% redeemable loan stock:ParticularsDetailsFace Value of Bond103.26Bonds O/S1500000Coupon Rate0.09Market Price of Bond100Coupon9.2934Market Value150000000Maturity (Years)10Corporate Tax Rate0.35Cost of Debt before tax42.20%Cost of Debt after tax27.43%Cost of 6% Unsecured loansParticularsDetailsFace Value of Bond100Bonds O/S2000000Coupon Rate0.06Market Price of Bond75Coupon6Market Value150000000Maturity (Years)6Corporate Tax Rate0.35Cost of Debt before tax70.40%Cost of Debt after tax45.76%2
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