1. Allfresh Limited manufactures consumer products for a mature product market. As such, its growth rate is fairly minimal and expected to be only 2.0% per annum. The company has just paid a dividend of $0.57 per share. The company has a beta of 0.9, while the current risk free rate is 2.5% and the expected market risk premium is 7%.
The share price for Allfresh Limited is?
2. The only debt Allfresh Limited has is $70 million of bonds (par value) that it issued three (3) years ago. When the bonds were first issued three years ago they had a stated 10-year maturity and coupon rate of 9.5%. Currently, the bonds are trading at an investors required rate of return 8.0%. The company tax rate is 28% and the current market value of its equity is $145 million. (Use required return you calculated in Part 1 above for the cost of ordinary shares.)
What is the WACC for Allfresh Limited using the current market values of debt and equity?