1 answer

The following information of Buildsworth (Pty) Ltd is presented to you. Market value of equity Share...

Question:

The following information of Buildsworth (Pty) Ltd is presented to you. Market value of equity Share capitale Book value of t
The following information of Buildsworth (Pty) Ltd is presented to you. Market value of equity Share capitale Book value of the long-term loan at 12% Market value debentures D Book value of debentures at 13% Retained incomee Market rate of equity Current JIBAR rate of similar long-term loans Market return for similar debentures R15 000 000 R12 000 000 R 1 968 000 R 4 632 000 R 5400 000 R 7 800 000 17% 10,0% (after tax) 13% (before tax) REQUIRED: Calculate the weighted average cost of capital (WACC) of Buildsworth (Pty) Ltd. [Show detailed workings and round your final answer to two decimal places.

Answers

Tax rate is not given so assumed to be 0%

Calculation of WACC (Market Value)
Sources Market value Weights Specific cost Weighted cost
Equity   15,000,000.00 69.44% 17% 11.81%
Loan     4,632,000.00 21.44% 10% 2.14%
Debenture     1,968,000.00 9.11% 13% 1.18%
Total   21,600,000.00 100.00% 15.13%
Calculation of WACC (Book Value)
Sources Bookt value Weights Specific cost Weighted cost
Equity   12,000,000.00 61.96% 17% 10.53%
Loan     5,400,000.00 27.88% 12% 3.35%
Debenture     1,968,000.00 10.16% 13% 1.32%
Total   19,368,000.00 100.00% 15.20%
.

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