Megatron Ltd has an equity beta of 1.5. The market risk premium in South Africa is expected to be 5% and yield on govern
Posted: Mon Mar 21, 2022 4:23 pm
Megatron Ltd has an equity beta of 1.5. The market risk premium
in South Africa is expected to be 5% and yield on government bond
(risk free rate) is currently 9.5%. Megatron has issued bonds and
its R100 par value bond is currently trading at R94.50. The coupon
is 10%. The maturity date is in 5 years’ time and the corporate tax
rate is 28%. Interest is payable annually in arrears. What is the
weighted average cost of capital if target debt to equity ratio is
50% and the cost of equity and debt is 15% and 8% respectively
in South Africa is expected to be 5% and yield on government bond
(risk free rate) is currently 9.5%. Megatron has issued bonds and
its R100 par value bond is currently trading at R94.50. The coupon
is 10%. The maturity date is in 5 years’ time and the corporate tax
rate is 28%. Interest is payable annually in arrears. What is the
weighted average cost of capital if target debt to equity ratio is
50% and the cost of equity and debt is 15% and 8% respectively