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QUESTION THREE Identify and discus five factors that determine the value of a financial option Njoro & Company has one million shares trading at the
QUESTION THREE
- Identify and discus five factors that determine the value of a financial option
- Njoro & Company has one million shares trading at the exchange at a market value of Ksh. 20 per share, and Kshs. 15 million in book value of outstanding debt (with an estimated market value of 2 million). The equity has a book value of 5 million and the recent financial year and paid 30 percent as taxes.
The fifteen year government bond rate is 10 percent. The average rate of return on the NSE- 20 share index is estimated at 15 percent.
Required
- Compute the cost of equity (5 marks)
- Compute the after tax cost of debt ( 5 marks)
- Compute the cost of capital (5 marks)
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