Question
Another company in the same economy has 400,000 A ordinary shares of 1 each nominal value, 400,000 B ordinary shares of 25 pence each nominal
Another company in the same economy has 400,000 A ordinary shares of 1 each nominal value, 400,000 B ordinary shares of 25 pence each nominal value and 100,000 1 nominal value 8% redeemable preference shares. The A ordinary shares have a current market value of 1.20 per share cum-dividend, with a dividend of 20 pence per share about to be paid. Dividends on A ordinary shares have been rising at a consistent rate of 5% per annual. The B ordinary shares are valued at par. Total dividends on B ordinary shares over the past four years have been 10,000, 11,500, 12,625 and 13,971, and a dividend of 14,641 has just been paid. The preference shares are currently valued at 80 pence per share, the preference dividend is about to be paid and a premium of 10% is payable on redemption of the preference shares in 10 yearstime.
Calculate: The cost of each of the three components of capital.
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