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ABC ltd has the following capital structure; equity P10,400,000 20 thebe ordinary shares with a market price of P5.20 reserves P2,200,000, preference shares P1,050,000 8%

ABC ltd has the following capital structure; equity P10,400,000 20 thebe ordinary shares with a market price of P5.20 reserves P2,200,000, preference shares P1,050,000 8% P1 preference shares with market price of 70thebe, loan stock P800,000 6% debentures with market a market price of pair (i.e P80.00 per P100 nominal value of stock) the ordinary shares dividend recently paid was 50thebe per share. dividends are expected to grow at 5% per annum for the foreseeable future. the Note : 100thebe= P1. required : a. using market values calculate the following: cost of equity ( 3 marks) cost of preference shares ( 3 marks) cost of loan stock ( 3 marks) based on the above calculations determine ABC ltd weighted average cost of capital ( 10 marks). identify and explain 3 factors that could influence the cost of the above source of finance. ( 6 marks)

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