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M ALEX, the Finance Director of Route company, is planning to raise funds to fund...

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Finance

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M ALEX, the Finance Director of Route company, is planning to raise funds to fund an bacquisition project. He has decided to use the following sources. (1) Issue bonds amounting to 2.5million with an annual coupon rate of 6.5%. (11) Issue 500,000 units of preferred shares for 2.00 each with a fixed dividend rate of 8% (11)Issue 100000 units of ordinary shares for 5.00 each. Mr. Patrick expect to pay an annual dividend of 10% to all its ordinary shareholders. Given that the tax rate of the company is 26% The preferred share should be 1millon, the ordinary share is 0.5 million You are required to: a. Calculate the total funds Mr. Patrick wants to raise to fund the acquisition. (2Marks) b. Calculate the net cost of debt of the bonds issued. (2 Marks) c. Calculate the WACC for the total funds raised for the acquisition. (4 marks) d. Explain and critically evaluate main sources of finance that could be utilized by a company during the times of COVID-19. (22 marks)

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