WACC

Question 1

The dividend valuation method

Answer 1

Ke = (Do(1+g))/Po +g

Do = Current dividend
Po = Current ex-div price
g = growth

Question 2

Growth - Geometric Average

Answer 2

=POWER(Most recent value/oldest value, 1/ number of period of growth)

Question 3

Growth - Earnings retention model

Answer 3

g = rb

r = PAT / Opening shareholders’ funds
b = Proportion of profits returned

Question 4

CAPM

Answer 4

Ke = rf + B(rm-rf)

rf = risk free rate
rm = market rate
(rm-rf) = market premium
B = riskiness of company

Question 5

Preference Shares

Answer 5

Kp = Do/Po

Do = Constant annual dividend
Po = ex-div market value

Question 6

Cost of Irredeemable Debt

Answer 6

Kd = (I(1-T))/Po

I = Interest
Po = Ex- interest price of the bond
T = Tax rate

Question 7

Cost of Redeemable Debt

Answer 7

=RATE( Nper, Pmt, (PV), FV)
x (1-T)

Nper = number of periods
Pmt = Interest
PV = Current ex-interest price
FV = Redemption value

Question 8

WACC

Answer 8

(MV x K) / MV

Question 9

Bank loan/ Overdraft

Answer 9

Kd = I(1-T)

I = Interest
T = Tax