QUESTION $2$

$($a$)$

The following information has been extracted from the financial statements of Reliance International Limited for the year ended $31$ December $2022$:

Equity shares of $$1$ each: $$1,000,000$

$8\%$ Preference shares of $$1$ each: $ $400,000$

$12\%$ Redeemable Debentures of $$100$ each: $ $300,000$

The current market value of an equity share is $$1\mathrm{.}30$ before paying the equity dividend. The market value of the redeemable debenture $($which is redeemable at $10\%$ premium in $2$ years$)$ is $$108$ per debenture. The preference share$$s current market value is $$0\mathrm{.}60$ per share.

The rate of growth of this company is expected to be $8\%$ every year and the current year equity dividend will be $$100,000$ which is due to be paid. The preference dividend and debenture interest have been already paid. The corporate tax will be $26\%.$

Required:

$-($a$)$ Calculate the Cost of Equity

$($b$)$ Calculate the Cost of Preference Shares

$($c$)$ Calculate the Cost of Debt $($Redeemable Debentures$)$

$($d$)$ Calculate the Weighted Average Cost of Capital $($WACC$)$

$2.$The shares of a listed company have greater marketability$.$ Critically evaluate the above statement with specific reference to the merits and demerits of a company securing a Stock Exchange Listing. Discuss the various methods that are commonly available for the issue of ordinary shares of a limited company.

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