The Malcolm Ski Resort is looking to determine its cost of capital and has asked you to assist.
Information available includes the following:
Preference Shares:
The preference shares were issued for $30 with a 15% dividend. The current market price is $27.5. When they were initially issued, they issued $200m worth of shares.
Debt:
The debt that the firm has issued was issued 20 years ago and has 7 years left to maturity. The bonds pay a semi-annual coupon of 9% pa. The bonds were issued for $1000 each and are currently valued at $1000 each. 20 years ago $150,000,000 worth of debt was issued
Ordinary Shares:
The company has 225 million ordinary shares on issue with a market price of $1.85 each.
The Beta of these shares is .9, the market risk premium is 6% and the risk free rate is 2%.
These shares last paid a dividend of 25 cents with expected growth of 2%.
Other Information:
The tax rate is 30%.
Calculate the following:
Determine the weight of debt, ordinary equity and preference equity to be used in the calculation of the after tax WACC. Please answer as a decimal to 4 decimal places.