Question Two

Executive Fruit Ltd, a Ghanaian Company, has issued debt at 8% interest per annum, preferred

stock and common stock. The market value of these securities are 8 million, 4 million, and

12 million respectively. The beta for Executive Fruit's common stock is given as 1.15. The

return on riskless assets is 12% whiles the expected return on the Ghana Stock Exchange

Composite Index (GSE-CI), a proxy for market portfolio, is 32%. Executive Fruits Ltd pays

12.00 dividends on each of the outstanding 80,000 preferred stock and has a marginal tax rate

of 35%.

a

Determine the pretax cost of debt

Determine the tax - adjusted cost of debt

Determine the cost of common stock

Determine the cost of preferred stock

Determine the Weighted Average Cost of Capital (WACC)