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a) Bombay Investment Company as had a good trading period and wants to raise finance from the following sources. issues 120,000 ordinary shares of shs
a) Bombay Investment Company as had a good trading period and wants to raise finance from the following sources. issues 120,000 ordinary shares of shs 10 at shs 15 each. Issue 90,000 10% preference shares of shs 10 at shs 14 each. Issues 120,000, 15 % debentures of shs 120 at shs100 each. To raise a loan of shs 4.5 million from a financial institution which will be at an interest rate of 20%. The company will pay an annual dividend to ordinary share of 14%, a floatation cost of 1sh and a corporation tax of 50%. Required: i. Determine the total amount of finance that will be raised if the plan is realized. ii. The average cost of additional finance. (10mks)
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