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Santova Industries finances its projects with 40 percent debt, 10 percent preference share, and 50 percent ordinary share. The company can issue bonds at a
Santova Industries finances its projects with 40 percent debt, 10 percent preference share, and 50 percent ordinary share. The company can issue bonds at a yield to maturity 8.2 percent. The cost of preference share is 7.8 percent. The company's ordinary share currently sells for R26 a share. The company's dividend is currently R2.33 a share and is expected to grow at a constant rate of 6 percent per year. Assume the flotation cost on debt and preference share is zero, and no new share will be issued. The company's tax rate is 28 percent Required: a. Calculate the cost of ordinary share. %
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