MAC2602 ASSGNMENT 5 sem 2 of 2023 COMPARATIVE ANSWERS

Questionn 2 part A
A) MARKET CAPITALISATION 700000*35
24,500,000.00

B) TOTAL MARKET VALUE = MKT VALUE OF EQUITY+ MKT VALUE OF DEBT

2500000+24500000
27,000,000.00

c)
After tax cost of debt 9%*(1-0.28)
6%

Cost of equity 14%

type of finance Value Cost Weighted cot
Equity 24,500,000.00 14.00% 12.70%
Debt 2,500,000.00 6.48% 0.60%
27,000,000.00 WACC 13.30%


D)
After tax cost of debt 11.5%*(1-0.28)
8.28%

Cost of equity 17.30%

type of finance Value Cost Weighted cot
Equity 50% 8.28% 4.14%
Debt 50% 17.30% 8.65%
1.00 WACC 12.79%

e)
since all equity are paid as dividends g=0

Po D1/ke

EBIT 3,600,000.00
Interest(0.09*2500000) (225,000.00)
profit before tax 3,375,000.00
tax (945,000.00)
profit for the year 2,655,000.00

Eps= profit for the year/no of shares
3.79

Po= D1/ke

, 3.79/.1279
29.63


Questionn 2 part B

FV 2,000.00
P/YR 1.00
*P/YR 6.00
1/YR 11.00
PMT 240.00
PV 2,084.61

After tax cost of debt 10% 12%

fv 2,000.00 2,000.00
0.564 0.51
Present value 1,128.00 1,014.00
pmt 240.00 240.00
4.3550 4.11
1,045.20 986.64

2,173.20 2,000.64
NPV 173.20 0.64

(173.20/(172.02-
10.00 0.64))*(10-12)

7.98