GREAT ZIMBABWE UNIVERSITY

MUNHUMUTAPA SCHOOL OF COMMERCE

STRATEGIC FINANCIAL MANAGEMENT

MODULE CODE MSM 508

INDIVIDUAL ASSIGNMENT

A company has the following long-term capital outstanding as on 31 March 2016:

a.      10% debentures with a face value of $500 000.  The debentures were issued in 2008 and are due on 31 March 2016.  The current market price of a debenture is $950.

b.      Preference shares with a face value of $400 000.  The annual dividend is $6,00 per share.  The preference shares are currently selling at $60,00 per share.

c.       Sixty thousand ordinary shares of $10,00 par value.  The share is currently selling at $50,00 per share.  The dividends per share for the past several years are as follows:

Year                    $                                   Year                      $

2008                  2,00                               2012                    2,80

2009                  2,16                               2013                    3,08

2010                  2,37                               2014                    3,38

2011                  2,60                               2015                    3,70

Required;    Assuming a tax rate of 35%, compute the firm’s weighted average cost of capital (WACC)

                                                                                                               (20 marks)