ABC Corp. is identifying the value of its equity using the enterprise value approach as they have never issued dividends to date because the Company is still at its early stages. With this, they have the following available information: The government's real free rate for its debt securities is estimated at 3.5% with an estimated inflation premium of 1.5%. The target capital structure of ABC Corp. is at 60% debt and 40% equity ABC Corp. was able to determine that its cost of debt is estimated as: With 3 years maturity - 6.50% With 4 years maturity - 7.0% With 5 years maturity - 8.0% The following are the information about the current debts issued by ABC Corp. A 3-year maturity instrument carries a Php500,000 face value and 8.0%coupon A 5-year maturity instrument carries a Php500,000 face value and 8.0%coupon Considering the current crisis, equity investors generally demand a 3.5%premium over government securities ABC Corp's estimated beta is at 1.2 1. How much is the weighted average cost of capital assuming cost of debt is at7.25% and tax rate is at 30%?
ABC Corp. is identifying the value of its equity using the enterprise value approach as they have never issued dividends to date because the Company is still at its early stages. With this, they have the following available information:
The government's real free rate for its debt securities is estimated at 3.5% with an estimated inflation premium of 1.5%.
The target capital structure of ABC Corp. is at 60% debt and 40% equity
ABC Corp. was able to determine that its cost of debt is estimated as:
With 3 years maturity - 6.50%
With 4 years maturity - 7.0%
With 5 years maturity - 8.0%
The following are the information about the current debts issued by ABC Corp.
A 3-year maturity instrument carries a Php500,000 face value and 8.0%coupon
A 5-year maturity instrument carries a Php500,000 face value and 8.0%coupon
Considering the current crisis, equity investors generally demand a 3.5%premium over government securities
ABC Corp's estimated beta is at 1.2
1. How much is the weighted average cost of capital assuming cost of debt is at7.25% and tax rate is at 30%?
2.
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