Question
ANDW plc pays corporation tax at 30% and has the following capital structure: - Ordinary shares : 1,000,000 ordinary shares of nominal value 25p per
ANDW plc pays corporation tax at 30% and has the following capital structure:
- Ordinary shares: 1,000,000 ordinary shares of nominal value 25p per share and market value of 79p per share. A dividend of 6p per share has just been paid and dividends are expected to grow by 5% per year for the foreseeable future.
- Preference shares: 250,000 preference shares of nominal value 50p per share and market value of 42p per share. The annual net dividend of 7.5% has just been paid.
- Bonds: 100,000 of 7% irredeemable bonds with a market price of 102 per 100 nominal. The annual interest payment has just been made.
Calculate the weighted average after-tax cost of capital of ANDW plc.
- 7.0%
- 9.0%
- 11.0%
- 13.0%
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