question archive The following data applies to Micro Advanced Developers (MAD)
The following data applies to Micro Advanced Developers (MAD)
Subject:FinancePrice: Bought3
The following data applies to Micro Advanced Developers (MAD).
| Debt | Equity |
|---|---|
| market value of debt = $315,350 | market value of equity = $186,946 |
| time to maturity of debt = 7 years | risk free rate = 3.8% pa |
| coupon rate = 4.6% pa paid semi-annually | market risk premium = 7.2% pa |
| face value = $400,000 | DDD beta = 0.89 |
As a financial manager you have been given the task of calculating the company's weighted average cost of capital (WACC). Ignore the effect of taxes.
a)Firstly, you realise that the cost of debt is needed. Calculate the cost of debt for MAD. You may give your answer as a percentage per annum to the nearest percent or use linear interpolation or a financial calculator to give a more accurate result.
Cost of debt = % pa
b)Secondly, the cost of equity must also be identified. Calculate the cost of equity for MAD. Give your answer as a percentage per annum to 1 decimal place.
Cost of equity = % pa
c)Finally, calculate the weighted average cost of capital for MAD. Give your answer as a percentage per annum to 1 decimal place.
Weighted average cost of capital = % pa
