MGFC10_Assg1_MTF16_W2017.pdf - MGFC10H3(Intermediate Finance ASSIGNMENT 1 Professor Due Date Wednesday February 8 2017 By 1pm Syed Ahmed STUDENTS NAME

MGFC10_Assg1_MTF16_W2017.pdf - MGFC10H3(Intermediate...

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MGFC10H3 (Intermediate Finance) ASSIGNMENT 1 Due Date: Wednesday February 8, 2017 By 1pm Professor: Syed Ahmed STUDENT’S NAME:________________________________________________ Last First Middle STUDENT’S I.D. NO.:_______________________________________________ QUESTION NO. MAX. MARKS MARKS OBTAINED 1 25 __________________ 2 25 __________________ 3 25 __________________ 4 25 __________________ TOTAL MARKS 100 __________________
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-2- QUESTION 1: a. Nozama Online Limited has 10 million shares of common stock outstanding. The current share price is $40 per share. The dividend one year from today is expected to be $4 and the growth rate is -2%. Nozama also has a bond issue outstanding, which is maturing in 10 years, has a face value of $200 million, 6% coupon payable annually, and sells for 107.7217% of the face value. Nozama also has 2,000,000 preferred shares outstanding, which are currently selling for $80 per share and pay a dividend of $4.48 per year. The corporate tax rate is 40%. Determine the weighted average cost of capital? b. WeLoveDebt Inc. has a target debt/equity ratio of 3, weighted average cost of capital of 9% and the corporate tax rate of 40%.
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