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EXAMPLE Kondwani Billy Hope PLC is financed partly by equity and partly by debentures. The equity proportion is always kept at two thirds of the

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EXAMPLE Kondwani Billy Hope PLC is financed partly by equity and partly by debentures. The equity proportion is always kept at two thirds of the total. The cost of equity is 18% and the cost of debt is 12 %. A new project is under consideration which will cost K100,000 and will yield a return before interest of k17,500 a year in perpetuity. Should the project be accepted. Ignore taxation

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