Q#4( 08 ) The following balances appear in the balance sheet of HASF ltd

Equity shares of RS 5 each 800,000

10% Pref. Shares of RS 10 each 500,000

Retained earning 600,000

12% Debentures 1,000,000

The company is expected to earn an ebit of 900,000 annually and the tax rate is 40% the current market prices of the equity and preference shares are RS.12.50 and 8 respectively. However, the debentures are being traded at par. Find out the cost of debentures, cost of retained earnings. cost of preference share, cost of common equity and Weight average cost of capital

Other information

Growth rate 10 %

Flotation cost 10%

Rate of dividends on common stock 10%