WACC Help!

    • Thread Starter

    Hi all,

    This is the background:

    Lincoln plc is looking to take advantage of the expected improvement in economic conditions and invest in a major new project. The company needs to determine a suitable discount rate in order to calculate the project’s net present value. Although the project is in a different industrial sector and is very different in nature to the company’s current activities it has been agreed that the company’s existing weighted average cost of capital (WACC) should be calculated as a starting point.

    The following financial data is currently available for Lincoln plc.

    Issued share capital: 10 million, £1 par value ordinary shares trading at £1.25 each on the stock exchange. The most recent dividend paid was 8p per share and dividends have grown at 5% per annum in recent years.

    Debt capital: 60,000 irredeemable debentures each with a nominal value of £100 and paying a coupon rate of 6%. Each debenture trades at £80 on the stock exchange.
    Corporation tax is 25%

    The MVd = 4.8 (I have the answer sheet)

    Why is it 4.8? I just dont get it.

    Thank you
Write a reply… Reply
Submit reply


Thanks for posting! You just need to create an account in order to submit the post
  1. this can't be left blank
    that username has been taken, please choose another Forgotten your password?
  2. this can't be left blank
    this email is already registered. Forgotten your password?
  3. this can't be left blank

    6 characters or longer with both numbers and letters is safer

  4. this can't be left empty
    your full birthday is required
  1. Oops, you need to agree to our Ts&Cs to register
  2. Slide to join now Processing…

Updated: May 5, 2012
TSR Support Team

We have a brilliant team of more than 60 Support Team members looking after discussions on The Student Room, helping to make it a fun, safe and useful place to hang out.

Electronic notes or handwritten notes?

The Student Room, Get Revising and Marked by Teachers are trading names of The Student Room Group Ltd.

Register Number: 04666380 (England and Wales), VAT No. 806 8067 22 Registered Office: International House, Queens Road, Brighton, BN1 3XE

Quick reply
Reputation gems: You get these gems as you gain rep from other members for making good contributions and giving helpful advice.