Business, 09.12.2021 03:50 history4380

Question 2 The current capital structure of Blend Co is as follows: $'000 Ordinary shares 8,000
Preference shares 2,000
Long-term loans 2,000

(a) The after-tax cost of debt is 5%, cost of preference shares and ordinary shares are 8% and 15%, respectively. Compute Blend Co's WACC under the current capital structure.

(b) After reviewing the company's operations and growth plan, Blend Co decided to change its capital structure by issuing bonds at market value of $10 million. The before-tax required rate of return for these bonds is 6% and the company's tax rate is 10%. Required Compute the new WACC. (Hint: The cost of ordinary shares, preferences shares, loans and bonds should be weighted separately.] "

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Question 2 The current capital structure of Blend Co is as follows: $'000 Ordinary shares 8,000

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