Question 5.3 Marine ple is a multi-national company that manufactures boats and other accessories for scuba diving. The

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Question 5 3 Marine Ple Is A Multi National Company That Manufactures Boats And Other Accessories For Scuba Diving The 1 (40.42 KiB) Viewed 10 times

Question 5.3 Marine ple is a multi-national company that manufactures boats and other accessories for scuba diving. The company is currently paying 30 per-cent tax on profit. Marine plc has in issue five million ordinary shares with a market value of RM2.80 per share. The equity beta of the company is 1.2. The yield on short-term government debt is 4.5% per year and the equity premium is approximately 5% per year. In addition, the company has recently (assume today is 1 January 2010) issued two million 10% RM1.50 preferred shares with a market value of RM2.00 per share. The preference shares are redeemable at par on 31 December 2025. A flotation cost of 10 per-cent was incurred on issue of new preference shares. The debt finance of Marine ple consists of bonds with a total book value of RM2 million. These bonds pay annual interest before tax of 8%. The par value and market value of each bond are RM100. Required: Calculate the after-tax weighted average cost of capital of Marine plc. (10 marks)