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Freeze Ltd . uses only debt and ordinary shares to finance its operations. Its current composition of debt is $ 7 5 , 3 0
Freeze Ltd uses only debt and ordinary shares to finance its operations. Its current composition of debt is $ of bank loans at an interest rate of The last dividend the company paid was $ and the current ex div market price is $ Dividends are estimated to grow at per year. In the books of Freeze Ltd ordinary shares are quoted at $ at a price of cents per share. Freeze Ltd pays a corporate tax of
Using the information provided above, calculate the;
i cost of equity,
ii cost of debt, and
iii. weighted average cost of capital of Freeze Ltd
iv weighted average cost of capital if the capital structure of Freeze Ltd changes to
a equity and debt mark
b equity and debt mark
c What do you observe as the proportion of debt in the capital structure
increases? mark
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