Lex Service plc – Cost of Capital
Questions:
1. Why does Lex service need to discuss the cost of capital today (1993) and at
such high level?
2. What should cost of (equity and unlevered) capital for Lex Service had been if
the company had not undergone all the recent (1991-93) restructuring?
3. In order to value future investments should the company use a single hurdle or
multiple divisional hurdles? Will that make a significant difference in this case?
4. Produce balance sheets at market values for each of the three individual
businesses.
5. What is the cost of capital (equity and unlevered) for each of Lex Service’s
individual businesses, assuming the future target debt ratios?