Cost of Capital Online Test

What is the SFM MS Holding's WACC given the following information?

Its capital structure is 44% debt and 56% equity

Its bonds are currently trading at 98.6% of par with semiannual coupons of $40 that matures in 9 years time

Its corporate tax rate is 17%

Its Beta is 1.73

The market risk premium is 7%

The risk-free rate is 4%


Lion Beer has 4,000 bonds that are currently trading at 97% of par. It also has 2,000,000 outstanding shares that are currently trading at $2.60. What is the capital structure of Lion Beer?


Ringro Ltd has 2,000 bonds that are currently traded at $965 each. It also has 2.5 million shares outstanding trading at $0.84. The company's earnings before tax and earnings after tax is $20 million and $16 million respectively. Its cost of common stock is 18% and its cost of debt is 10%. If the prefered stock dividend is $0.30 and has a weightage of 11.0375%, what is the current price of preferred stock given that its WACC is 13.0773%? (Hint: do not round off in the process of your calculations, only round off your final answer to 2 decimal places).


A firm's debt-to-equity ratio is 0.8, what is the capital structure of this firm? Debt __ %, Equity __%.


One of the biggest Hypermart in the Mimalayas, MalMart Inc intends to expand its business portfolio into shipping. To do so, it would require excessive funding. Its recently issued debt is traded at 96.2% of face value with annual coupons of $100 that will expire in 10 years time. In addition, it intends to issue new equity for this expansion. MalMart's common stocks are traded at $4.80 and had just paid dividends of $0.67. The company is taxed at a rate of 21.5%. MalMart has been maintaining a constant payout ratio and its CFO estimates that its EPS will grow indefinitely at a constant rate of 6% annually. Goldman Sacs charges $0.15 per share to underwrite the new issues, if its target capital structure is 45% debt and 55% equity, what is the WACC of MalMart?


Orange Inc, a waste service solutions provider is intending to invest in a new product that can immediately break down foreign objects in sewage pipes so as to relief blockages. It will require a substantial investment but all of its funds have been tied up in various projects. To fund this new project, Orange Inc has decided to raise funds from the public. It's current capital structure consists of 55% debt and 45% common stock but intends to modify this structure into 40% debt and 60% common stock. Orange Inc's beta is 1.42. The market has an average return of 10% while the risk-free rate is 4%. The firm's recently issued debt is publicly traded and was recently quoted at 93 percent of face value and is paying 8% coupon semi-annually that will expire in 10 years time. If Orange Inc's tax rate is 23%, what should the annual WACC of the company be?


DIM Holdings ad earnings after tax of $15 million and will retain 40% of it while giving out all of the balance as dividends. With 60,000,000 outstanding shares, what is the estimated dividends growth rate if its current share price is $1.60?


What is the appropriate growth rate to use based on the dividends paid out below if it is currently year 2010:

Year Dividend

2006 $1.45

2007 $1.50

2008 $1.60

2009 $1.65

2010 $1.80


MiserSoft Ltd, a blue chip company paid dividends of $1.90 last year. Several analysts covering this company estimate that its dividends will grow by 5.5% annually. Its stocks are currently trading at $39.50, what should be the company's cost of equity?


























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Eugene Ong
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