1. Rama Company issues 120, 000, 10% bonds Br 10 each at 10% premium. The floatation costsare4%. Therateof tax applicableto thecompanyis 55%. Computethecostofdebt.
2. Ura Limited issues 4000, 12% preference shares of Br 100 each. Costs of raising the capital isBr800. Computethecostof preferencecapital.
3. Computethecostofcapitalofa preferredsharesoldatBr100with8%dividend.
4. Your company share is quoted in the Addis Exchanges at Br 40. The company pays adividendof Br5 per shareandthemarketexpectsa growthrateof7.5%per year:
   1. Computethecompany'sequitycostofcapital.
   2. Iftheanticipatedgrowthrateis10%,calculatetheindicatedmarketpricepershare.
   3. If the company's cost of capital is 15% and the anticipated growth rate is 10%,calculate the indicated market price assuming Br 5 dividend per share is to bemaintained
   4. Why is the cost of capital considered as the minimum acceptable rate of return oninvestment?
   5. Howis thecostof debtcapitalascertained?Giveexamples.