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Weighted average cost of capital for BrainM plc

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A Company (BrainM plc) has 10 million ordinary shares of 50p each in issue out of an authorised ordinary share capital of 12 million. The company has recently paid a dividend of 12p per share on the ordinary shares, which are currently listed at 112p ex div. The dividend growth rate has recently been a little under 10% p.a., and this is expected to continue for the foreseeable future. Extracts from the group balance sheet are as follows:

BrainM plc
£000
Ordinary shares 5,000
Share premium 3,920
Reserves 7,490
Minority interests 1,790
3% irredeemable debentures 3,000
6% redeemable debentures 4,000
Bank loans 7,080

Interest on the debentures is payable annually, and both of the current year's payments are impending. The current market prices for £100 nominal value stock are £31.50 and £103.50 for the 2% and 6% debentures, respectively (both values being cum interest). The 6% debentures are redeemable in ten years' time at a premium of 2.5%. The bank loans currently bear interest at 2% p.a. above base rate (which is currently 3.5%) and are repayable in eight years. The effective corporation tax rate for BrainM plc is 35%.

How would I calculate the weighted average cost of capital to be used by the company in appraising the viability of the projects? Can you please explain, so i can understand how and why you come about it.

If anyone can help me, it would be much appreciated. Thank you in advanced.

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This provides the steps to calculate the weighted average cost of capital

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Firm's optimal capital structure is that mixture of debt and equity than minimizes its weighted average cost of capital (WACC). While this is a true statement, it glosses over a number of interesting issues on the path to that grand conclusion on the WACC-minimizing capital structure.
For example, since the after-tax cost of debt is lower than equity for many corporations, why not use debt only or mostly? It ...

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