Question
A company has the following book value in capital structure: GHSM Equity capital (in shares of GHS 10 each, fully paid-up at par) 15 11%
A company has the following book value in capital structure: GHSM Equity capital (in shares of GHS 10 each, fully paid-up at par) 15 11% Preference capital (in shares of GHS 100 each, fully paid-up at par) 1 Retained earnings 20 13.5% Debentures (of GHS 100 each) 10 15% Term Loans 12.5 The next year expected dividend on equity shares is GHS 3.60 per share and the dividend per share is expected to grow at 7% into the foreseeable future. The market price per share is GHS 40. Preference stock, redeemable after 10 years is currently selling at GHS 75 per share. Debentures, redeemable after six years, are selling at GHS 80 per debenture. The income-tax rate for the company is 40% Required Calculate the weighted average cost of capital of raising new capital.
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