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QUESTION two: Suppose company Q has a total value of K12, 500, Value of its equity is K7, 500 and the value of its debt

QUESTION two:

Suppose company Q has a total value of K12, 500, Value of its equity is K7, 500 and the value of its debt is K5, 000. Assume the cost of equity (or equity capitalization rate), ke, is 9.33% and the cost of debt, kd, i.e. 6%. Calculate:

i. The Debt Ratio. 5 Marks

ii. The equity Ratio. 5 Marks

iii. The Weighted Average Cost of Capital. 10 Marks

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