Jupiter plc has the following capital structure:
Equity: 3,500,000 ordinary shares of £1 each(par value of each share), current market price £2.20 per share.
Cost of Equity
Debt: £1,000,000 irredeemable debentures at book value, currently trading at £105 each. The coupon rate is 4.5%
The current year’s dividend is 30p and the expected growth rate for dividends is 4%.
The current tax rate is 25%
Calculate the cost of equity, the cost of debt and the Weighted-average cost of capital (WACC) for Jupiter plc.
I have problem in calculating the weighting . Can someone please explain by details on how do I calculate the weightings so I can calculate the WACC properly
In the answer sheet, it is shown that
Market Value of Ordinary Shares : 7,700,000 (3,500,000x £?2.20)
Market Value of Debt : 1,050,000 ( 1,000,000 x £105? = 105,000,000)
or the answer sheet is just wrong?