Education homework help
Education homework help. THIS IS MY THIRD TIME UPLOADING THIS…IS THERE ANYONE WHO CAN SOLVE THIS?NOBODY?….. :(Pür Copper Corp. is a publicly traded company listed on the TMX. The company has 20,000,000 common shares outstanding and current stock price is $30 per share.According to Pür Copper’s balance sheet as at December 31st 20XX:Pür Copper’s has retained earnings of $25,700,000Pür Copper has $200,000,000 preferred shares outstanding paying a 5.3% annual dividend. These preferred shares are owned by one of the company’s main clients, TokyoTelecom, as part of a long-term strategic partnership. This partnership involves Pür Copper’s commitment to supply TokyoTelecom with a certain quantity of copper at a certain price each year (these prices and quantities are revised regularly according to an agreed schedule).Pür Copper has $300,000,000 of outstanding debt (bonds) paying a 5.5% annual coupon. These bonds were issued at par (face value = $1000) 2 years ago and have a remaining term to maturity is 8 yearsThe firm’s corporate tax rate is 30%.Pür Copper is considering investing in a new project that will require external financing. The project is as risky as the existing operations of the firm.Given current market circumstances, Pür Copper could raise new equity and debt under the following conditions:Comparable 8 year corporate bonds issued at par are currently yielding 6.40% per annum. Thanks to its long-term agreement with TokyoTelecom, Pür Copper’s bonds are perceived as less risky than similar corporate bonds. Therefore, the yield required by potential investors is 30 basis points lower than the yield required for other comparable corporate bonds. A 2.75% (after tax) underwriting fee (floatation costs) applies to new bond issues.Pür Copper could issue new common shares at 5% discount from the current market price per share. Existing shareholders expect a 19.9% return on their investment.New preferred shares could be issued with 5.9% yield. After tax issuing and underwriting fees are equal to 6.3% of par value.Remember 1% = 100 basis pointsWhat is Pür Copper Corp.’s marginal cost of capital (MCC)?Follow the below steps:Step 1: Calculate the Cost of Debt ki (after tax and after flotation costs)Calculate the Coupon Rate for New Bonds:Step 2: Calculate the Cost of Preferred Equity kpCalculate the Preferred Dividend DpStep 3: Calculate the Cost of New Common Equity kne Calculate the Net Proceeds per share NPeStep 3: Solve for the weights: B/V, P/V and E/VCalculate the Bond to Value B/V weight to 4 decimal placesStep 4: Calculate the MCCNote: MCC = WACC for the next dollar raised (for a given capital structure)Calculate the MCC to 4 decimal places
