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Inno - V - Tech Limitednno - - Tech Limited, a cutting - edge technology firm, wants to develop a new product. The company needs
InnoVTech LimitednnoTech Limited, a cuttingedge technology firm, wants to develop a new product. The company needs R million and has to decide on the composition of funds to finance the project.The company has four potential sources of funds: Ordinary Share Capital: InnoTech can issue ordinary shares to raise capital from shareholders. The shares are currently trading at R per share. The last dividend was R per share and the expected dividend is R per share. The company may issue up to ordinary shares Preference Share Capital: The company can issue preference shares to investors. The shares pay a dividend of R per share and are currently trading at R per share. The company may issue up to preference shares LongTerm Loan: The company can borrow up to R million from a bank. The interest rate on the loan is Irredeemable Debentures: Debentures with a par value of R may be issued. Similar debentures trades at R The company may issue up to debentures.The corporate tax rate is Calculate the cost of each source of capital With the aim of keeping the weighted average cost of capital of InnoVTech Limited as low as possible, decide how much capital to raise from each source. Provide reasons for each amount. Using the capital structure decided on in calculate the weighted average cost of capital WACC of InnoVTechLimited. Round calculations off to two decimal places, where applicable.
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