QUESTION ONE Equity and liabilities 12% debentures (shs1000 at par) 16,000 10% preferences shares
Posted: Wed Mar 09, 2022 8:45 am
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)
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)