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    Lucky Cement Corporation (Alo)

    Uploaded by

    Ryan Agcaoili
    This document contains calculations of the cost of capital for Lucky Cement Corporation. It provides the costs of various components: - Cost of short term debt is 8.45% - Cost of long term debt is 8.78% - Cost of preferred stock is 14.29% - Cost of common equity is 17.3% It then calculates the weighted average cost of capital (WACC) as 13.86% including short term debt and 14.81% without short term debt.

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    Lucky Cement Corporation (Alo)

    Uploaded by

    Ryan Agcaoili
    60 views8 pages
    This document contains calculations of the cost of capital for Lucky Cement Corporation. It provides the costs of various components: - Cost of short term debt is 8.45% - Cost of long term debt is 8.78% - Cost of preferred stock is 14.29% - Cost of common equity is 17.3% It then calculates the weighted average cost of capital (WACC) as 13.86% including short term debt and 14.81% without short term debt.

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    Lucky Cement Corporation (Alo).pptx

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    This document contains calculations of the cost of capital for Lucky Cement Corporation. It provides the costs of various components: - Cost of short term debt is 8.45% - Cost of long term debt is 8.78% - Cost of preferred stock is 14.29% - Cost of common equity is 17.3% It then calculates the weighted average cost of capital (WACC) as 13.86% including short term debt and 14.81% without short term debt.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    60 views8 pages

    Lucky Cement Corporation (Alo)

    Uploaded by

    Ryan Agcaoili
    This document contains calculations of the cost of capital for Lucky Cement Corporation. It provides the costs of various components: - Cost of short term debt is 8.45% - Cost of long term debt is 8.78% - Cost of preferred stock is 14.29% - Cost of common equity is 17.3% It then calculates the weighted average cost of capital (WACC) as 13.86% including short term debt and 14.81% without short term debt.

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    Lucky Cement

    Corporation
    Agcaoili | Balquin | Custodio | Ramos | Victorio
    Current Cost of Capital
    Cost of Debt
    Given: kd = cost of debt x (1 – tax rate)

    13% interest rate on short Short term notes payable (13%)


    term notes payable kstd = 13% x (1 – 35%) = 8.45%

    13.5% interest on long term Long term debt (13.5%)


    debt
    kltd = 13.5% x (1 – 35%) = 8.78%

    Tax rate = 35%


    Cost of Preferred Stock
    Given: Using the dividend growth
    model:
    Dividend = P15
    (15% of P100 par value) kp =
    Dividend (𝐷𝑝 )
    𝑀𝑎𝑟𝑘𝑒𝑡 𝑃𝑟𝑖𝑐𝑒 𝑃𝑝 −𝐹𝑙𝑜𝑎𝑡𝑎𝑡𝑖𝑜𝑛 𝐶𝑜𝑠𝑡

    Floatation cost = P5
    15
    kp = = 14.29%
    105−5
    Cost of Common Equity
    Given: ks =
    𝐷1
    +𝑔
    𝑃0

    Dividend = P0.25 0.25(1+0.15)


    ks = + 0.15 = 17.3%
    12.50

    Dividend growth (g)= 15%

    Current stock price = P12.50


    Cost of New Common Stock
    Given:
    𝐷1
    ke = +𝑔
    𝑃0−𝐹𝑙𝑜𝑎𝑡𝑎𝑡𝑖𝑜𝑛 𝐶𝑜𝑠𝑡
    Dividend = P0.25
    0.25(1+0.15)
    ks = + 0.15 = 17.4%
    Dividend growth (g)= 15% 12.50−0.625

    Current stock price = P12.50

    Floatation cost = 5%
    WACC (w/ Short Term Debt)

    Amount of % of Capital Percentage


    Type WACC
    Capital Structure Cost
    Short Term
    2,211,300 15.0% 8.45% 1.27%
    Debt
    Long Term
    2,948,400 20.0% 8.78% 1.76%
    Debt
    Preferred Stock 2,000,000 13.6% 14.29% 1.94%
    Common
    7,582,300 51.4% 17.3% 8.90%
    Equity
    Total 12,530,700 100% 13.86%
    WACC (w/o Short Term Debt)

    Amount of % of Capital Percentage


    Type WACC
    Capital Structure Cost
    Long Term
    2,948,400 23.5% 8.78% 2.06%
    Debt
    Preferred Stock 2,000,000 16.0% 14.29% 2.28%
    Common
    7,582,300 60.5% 17.3% 10.47%
    Equity
    Total 12,530,700 100% 14.81%

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