Question 1: Calculate the cost of preference capital (kp) for a non-redeemable preference share which has the following:
Price = $17 and a Preference dividend of $1.4 paid every six months. Your answer should the effective annual cost as a decimal accurate to four decimal places. For example an answer of 12.113% should be entered as .1211 with no % sign. Explain the process of answer.
Question 2: XYZ Corporation has just paid a dividend of 54 cents per share. The current market price of the share is $15 and shareholders require a return of 9 % pa. What is the annual growth rate (g) of the dividends? Answer as a percentage accurate to two decimal places. Do not enter the % sign. Explain the process of answer.
Question 3: A company has annual net operating cash flow (X) of 1.2 million dollars in perpetuity and the market value of its capital (V) is 11 million dollars. What is the company's cost of capital ko? Provide your answer as a percentage to two decimal places. Do not enter the % sign. Explain the process of answer.
Question 4: Polycorp has a debt equity ratio of 0.38.What is the correct debt ratio D/V that should be used in the WACC formula?
WACC = ke x E/V + kd x (1-t) x D/V
Provide an answer as a decimal accurate to two decimal places eg 60.156% should be entered as .60
Do not enter the % sign. Explain the process of answer.