Can anyone solve this finance question for me... its urgent?

A company generates a constant perpetual cash flow of 100million per annum, pre corporate tax which is paid at a rate of 35%. The company is part financed by riskless debt with a current value of 拢250million. This debt pays a constant perpetual interest stream of 拢15million per annum. If the company were financed solely by equity it would have a market value of 拢650million.

What is the required rate of return to equity given company's current level of debt? Show all necessary calculations.

THIS IS NOT A HOMEWORK ASSIGNMENT. THIS IS A QUESTION BELONGING TO MY SUBJECT PAST PAPER

Value of perpetuity = (Coupon)/(r-g)
g = 0
r = WACC
Value = (100m*/(WACC-0%)

Assume WACC = 100% equity
K(e) = cost of equity
650m = [100m/K(e)]
K(e) = 100m/650m = 15.385%

Hey, remember this is the WACC, not the final answer. By the way, I am working hard on this too and good luck to your CFS! Report It

No. It's not the WACC. It's the answer to K(e) when you assume that WACC is 100% equity. Since you don't know the W(e) or W(d), you can't calculate the actual WACC. Report It

actually the question setter is asking to evaluate the K(e) under the situation with the stated debt (risk free rate is given, but being obmitted by the question raiser here) and equity(with, of coz K(e), yet this is what we have to find). Report It

i am sorry i dono d ans.....
sorry for makin u to read dis ans

bug up

This sounds like a homework problem that you're trying to get someone else to do for you. Therefore, I'm not going to go through all the calculations so that you'll just copy it and submit as your own. That would be cheating on everyone's part and is therefore highly unethical.

Howver, I also believe in helping people in need. Therefore, I've listed nelow the links to text passages that will help you review the materials that you'll need to solve the problem.

actaully could u plz repeat that briefly

I am not that hard up for points to be doing someone else's HW