Question
Jackstone Company wants to raise $6 million for investing in a new outlet, which will give a 12% return on its investment. The money
Jackstone Company wants to raise $6 million for investing in a new outlet, which will give a 12% return on its investment. The money will be obtained from the following sources: Bond A Bond B Common shares Preferred shares $ 1,000,000 300,000 3,000,000 700,000 Common shares Preferred shares Retained earnings Total Note: The above includes payment of dividends and issue costs only. 1,000,000 $6.000.000 The cost of capital for each source of financing is: Bond A 10.0% Bond B I 12.5% 16.0% 12.0% Retained earnings 14.0% Growth rate 2.0% What is the company's Weighted Average Cost of Capital? (5 marks)
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Step: 1
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