QUESTION ONE Equity and liabilities 12% debentures (shs1000 at par) 16,000 10% preferences shares

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QUESTION ONE
Equity and liabilities
12% debentures (shs1000 at
par)
16,000
10% preferences
shares
6,250
Ordinary shares (Shs 10
par)
12,500
Retained earnings

28,125
Additional information
i. The
debentures are currently selling at Shs 950 in the market
ii. Company paid
a dividend of Shs 5.00 per ordinary share and they are expected to
grow at a rate of 10% per annum.
iv. The corporation
tax is 40%
Required
Effective Cost of debt

(3 marks)
Cost of equity

(3 marks)
Weighted Average cost of capital

(4 marks)