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Chapter 20




                  WACC by market values:

                  Market value equity = 2m × $1.60 = $3.2m

                  Market value preference shares = 0.5m × $1.25 = $0.625m

                  Market value irredeemable debt = $1m/$100 × $80 = $0.8m

                  Total market value = $3.2m + $0.625m + $0.8m = $4.625m


                                 V e                    V d
                  WACC =  –––––––  k e +  –––––––  ‘k d(1 – T)’
                                   V e + V d            V e + V d

                  WACC = $3.2m/$4.625m × 15 + $0.625m/$4.625m × 4 + $0.8m/$4.625m × 5


                  WACC = 11.8%























































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