CALCULATIONS ONLY

The following is the capital structure of a company: The following additional information is available: Ordinary shares arc sh. 10 each with a market price of sh. 16 per share. Preference share nominal and market price is sh. 10 Debenture nominal price is 12 while the market price is sh. 10. Ordinary shares floatation cost per share is sh. 1. Corporation tax rate is currently at 30%. Bank loan interest is 14%. Equity dividend is currently sh. 1 per share and is expected to grow at 6% p.a Required: i) Compute the component of each cost of capital ii) Compute the company's weighted average cost capital. iii) The relevance of the WACC computed in (ii) above in making decisions. a) Using knowledge of agency theory discuss the sources of conflict between managers and shareholders and how to resolve these conflicts. b) An investor can get an annual interest rate of 12% on a deposit in a bank. Assuming he deposits sh. 10.000 and leaves it for 3 years what is the amount