Sample Essay The Primary Financial Objective of corporate finance is usually taken to be the maximization of shareholder wealth

(i)                  Select a UK plc and calculate the weighted average cost of capital, explaining any assumptions that you have made. Show all your calculations. (30%)

 

(ii)                The primary financial objective of corporate finance is usually taken to be the maximization of shareholder wealth. Discuss what other objectives may be important to a public limited company and whether such objectives are consistent with the primary objective of shareholder wealth maximisation (30%)

 

 

(iii)               Critically discuss whether you consider that companies, by integrating a sensible level of gearing into their capital structure, can minimise their weighted average cost of capital. (40%)

 

Word limit: 2,250 words

 

This my assignment first part I have done I am sending that to you too.. The company I have selected BLACK LEISURE AS MY COMPANY IN UK

PLEASE SEE TOWARD THAT AND MAKE SURE YOU GIVE WRITE ANSWERS OF LAST TWO PARTS

 

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  IN THIRD PART I NEED THREE THEORIES THAT ARE

  
  
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  TRADITIONAL VIEW

  
  


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  MODIGLIANI & MILLER (NO TAX)

  
  


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  MODIGLIANI & MILLER (WITHOUT TAX)

  
  

 

 

EXPLAIN MODES OF FINANCE AND GIVE ONE BEST WAY TO MINIMIZE WEIGHTED AVERAGE COST OF CAPITAL…

 WRITE REFERENCES TOO

 

THE CALCULATIONS OF BLACK LEISURE ARE

 

ORDINARY SHARES

DIVIDEND PER SHARE = 11.3P

EQUITY PER SHARE = 34.57P

GROWTH = 13%

 

MARKET VALUE OF THE SHARE = 556P

NUMBER OF SHARES =42468522 SHARES

Key = 11.3(1+0.13)

            ¾¾¾¾¾+ 0.13

             556

 

= 12.769

¾¾¾+0.13           = 15.30%

556

 

 

PREFERENCE SHARE S

 

TOTAL DIVIDEND = 89000

TOTAL PREFERENCE =891429

 

ASSUMPTIONS: CONSIDER THAT MARKET VALUE OF PREFERENCE SHARE IS £1

 

DIVIDEND 89000/891429 = 10 P

 

THEREFORE WACKY = Key * EQUITY/ EQUITY + DEBT +Kips * DEBT /EQUITY + DEBT

 

= 0.153 * 109580/109580+891 + 0.10* 891/109580+891

= 15%

 

ANOTHER WAY OF CALCULATE WACKY

P.S RATIO = 556/34.57 = 16.08

 

 

 

 

WEIGHT TO NEAREST £000

1. EQUITY SHARE = 16.08*3457*42468

                                      = 236073

 

2. PREFERENCE SHARES = £1.00*891=

 

   236073                  99.7%

   891                         0.3%

TOTAL                   100%

 

THEREFORE MULTIPLYING HOLDING INTO Key* Kips

Key = 0.153*99.7% = 0.152

Kips = 0.10*0.3%  = 0.0003

Total                     = 0.1523

So WACKY EQUAL TO 15%

 

 

 

SO THAT THE CALCULATIONS …

IF U HAVE ANY SORT OF PROBLEM DO EMAIL ME emleen14@yahoo.com.au

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