Question
A new publishing company had the following facts as at December 31st 2018: (i) The company had issued 150,000 common stocks in the year 2008
A new publishing company had the following facts as at December 31st 2018: (i) The company had issued 150,000 common stocks in the year 2008 that sold for $25 per share and their expected dividend was $1.5 per share which was expected to grow at 10% indefinitely.Floating costs amounted to6%. (ii) It also issued14%,10,00 debentures of $100 at $95 each in the year 2008 with maturity period of 10 years. (iii) The company raised additional funds for expansion purpose by issuing 5%,20,000 non-redeemable preference shares of $23 per share inclusive of floatation costs of 5%. (iv) A 5 year loan was borrowed in 2018 also for expansion purpose of $4,000,000 at 12% interest rate. (v) The company had retained profits of $1.5 million. Required Assuming a tax rate of 30%, compute the weighted average cost of capital for the company.
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