Question
The finance manager of ABC ltd has computed the after tax marginal costs of the company;s three sources of capital ordinary shares -600000 at a
The finance manager of ABC ltd has computed the after tax marginal costs of the company;s three sources of capital ordinary shares-600000 at a cost of 14%600000-1500000 at a cost of 17%over 1500000 at cost of 18%preference shares0-300000 at a cost of 12%over 300000 at a cost of 13%debts0-1000000 at a cost of 5%over 1000000 at a cost of 8%the manager wants to maintain the current present capital structure of 50% debt , 10% preference shares and 40% ordinary shares.Requiredi) the break point in the capital structureii) the weighted average cost of capital between breakpoints iii) draw the weighted marginal cost of capital schedule
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