QUESTION 4 The board of Zama Zama Enterprises Limited (ZZEL) a computer software company wish...
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QUESTION 4 The board of Zama Zama Enterprises Limited (ZZEL) a computer software company wish to measure their cost of capital. They have gathered the following data: Equity The firm has s twenty million shares outstanding with a current market price of R6 per share. The risk-free rate is 15%, and the expected return on the market is 20%. The firm has a beta of 1.975. Debt The company has one hundred thousand 10-year 7% semi-annual coupon bonds (par value E1000 each) which have three and half years to maturity. The bonds are priced to sell at a Yield to Maturity of 5%. Preference shares The firm has five million, 12% irredeemable preference share with a par value of issues have a par value of E10 and are currently trading at E15. The corporate tax rate is 30%. Required: Calculate ZZEL's WACC. (20 marks: 36 minutes)
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