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Need this question ASAP please Q3) A) Which source of capital, debt or equity is more expensive and why? (2 marks) B) The operating Income
Need this question ASAP please
Q3) A) Which source of capital, debt or equity is more expensive and why? (2 marks) B) The operating Income of A and B is $500,000 each. Company B is levered with at borrowing of 2,000,000 at a 12% interest rate. Tax rate is 50%. Which company enjoys leverage advantage, and by how much? (2 marks) C) A company that pays a preferred dividend of $10 per share if the company could sell new preferred with : value of $100 and a flotation cost of 2.5%. Calculate cost of preference capital with floatation cost. (2 Marks D) Consider the information in Q3C above. Calculate cost of preference capital without floatation cost comment on the cost of preference capital with and without floatation costs Step by Step Solution
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