MSc IBM, MSc IBF, MBA, MBA (Finance), MSc Accounting & Finance, MSc Risk Management Strategic and Financial Decision-making Assignment 2013/2014 Goodway plc is a holding company owning shares in various subsidiary companies. Its directors are currently considering several projects which will increase the range of the business activities undertaken by Goodway plc and its subsidiaries. The directors would like to use discounted cash flow techniques in their evaluation of these projects but as yet no weighted average cost of capital (WACC) has been calculated.
MSc IBM, MSc IBF, MBA, MBA (Finance), MSc Accounting & Finance, MSc Risk Management Strategic and Financial Decision-making Assignment 2013/2014 Goodway plc is a holding company owning shares in various subsidiary companies. Its directors are currently considering several projects which will increase the range of the business activities undertaken by Goodway plc and its subsidiaries. The directors would like to use discounted cash flow techniques in their evaluation of these projects but as yet no weighted average cost of capital (WACC) has been calculated. Lord Harris Tweed, the Managing Director, has called a meeting of the directors to discuss the calculation and use of the weighted average cost of capital as the discount rate for future capital investment decisions. Shilpa Gohal, the Finance Manager, has been asked to draw up some relevant figures for the calculation of the company’s weighted average cost of capital, as shown below. Goodway plc has an authorised share capital of 10 million 25p ordinary shares, of which 8 million have been issued. The current ex div market price per ordinary share is £1.10, a dividend of 11.4p per share having been paid recently. The company’s project analyst has calculated that 12% is the most appropriate after-tax cost of equity capital. Extracts from the latest balance sheets for the group are given below: Goodway plc???(£000s)??Issued share capital?2,000??Share premium?1,960??Reserves?3,745??Shareholders’ funds?7,705??Minority interests?895??3% irredeemable loan stock?1,400??9% redeemable loan stock?1,500??6% unsecured loan stock?2,000??Bank loans?1,540??Total non-current liabilities?6,440?? All debt interest is payable annually and all the current year’s payments will be made shortly. The current cum interest market prices for £100 nominal value stock are £31.60 and £103.26 for the 3% and 9% loan stock respectively. Both the 9% loan stock and the 6% unsecured loan stock are redeemable at par in ten years’ time….
Attachments:
SFDM–assignm….doc