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Capital Structure of Skyline Limited for the acquisition of new plant: Ordinary Shares $18 000 000 Preference Shares $6 000 000 Bonds $12 000 000

Capital Structure of Skyline Limited for the acquisition of new plant: Ordinary Shares $18 000 000 Preference Shares $6 000 000 Bonds $12 000 000 Finances sourced for the Acquisition of the new plant are as follows: 1) A 20-year bond with a coupon rate of 9% payable annually. The pre-tax cost of the bond issue is 13.5%; 2) Preference Share can be sold for $75.00 and each share will pay an annual dividend of $6.00; 3) The current risk-free rate of return is 4.75% and the expected annual return for the market is 10%. The beta for the stock is established as 1.40.

The tax rate of the company is 25%.

Compute the following using the information provided above:

  1. The after-tax cost of debt;

  1. The cost of preference shares;

  1. The cost of issuing new ordinary shares; and

  1. The Weighted Average Cost of Capital.

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