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SBS/ABS – MBA/MSC: Financial Management- Week 3 Assignment Help – Abu Dhabi 2021
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ASSIGNMENT TASK: 3 (20 Marks)
Answer the following questions:
- It is November 2021 and ATMS Plc has the following capital structure:
a). 5% redeemable bonds- Par value £100 (redeemable November 2025)
b). 8% irredeemable bonds- Par value £100
c). Ordinary shares- Nominal value 10p
d). 7% Preference shares- Nominal Value £1
Market Values
e). 5% redeemable bonds- £1,000,000 in total with each bond currently priced at £108
f). 8% irredeemable bonds- £2,000,000 in total with each bond currently priced at £115
g). Ordinary Shares- £4,000,000 in total with each share currently priced at 126p
h). 7% preference shares- £500,000 in total with each share currently priced at 82p
Additional Information
- The total ordinary share dividend proposed but not paid is 5.5p with an established year on year growth rate of 8%
- ATMS Plc pays corporation tax at 20%
Required- Calculate the individual cost of each of the 4 sources of capital and then the after tax Weighted Average Cost of Capital (WACC) of ATMS Plc (15 marks)
- DT plc has £20m of sales per year all of which are made on 60 days credit terms DT’s CFO is considering offering a 10% discount for early payment (within 20 days)
It is forecast that 40% of DT’s customers will take the discount and the remaining 60% will continue to pay in 60 days.
The short-term borrowing interest rate is 15%
Required
Calculate whether the proposed discount will result in a net saving or cost for DT plc
(5 marks)
For REF… Use: #getanswers2001827
