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MBA/MSC: Financial Management- Week 3 Assignment Questions and Answers

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:

 

  1. 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

  1. The total ordinary share dividend proposed but not paid is 5.5p with an established year on year growth rate of 8%
  2. 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)

 

 

  1. 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

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