Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The following information has been extracted from the financial statements of Reliance International Limited for the year ended 3 1 December 2 0 2 2

The following information has been extracted from the financial statements of Reliance International Limited for the year ended 31 December 2022:
Equity shares of $1 each : $1,000,000
8% Preference shares of $1 each : $ 400,000
12% Redeemable Debentures of $100 each : $ 300,000
The current market value of an equity share is $1.30 before paying the equity dividend. The market value of the redeemable debenture (which is redeemable at 10% premium in 2 years) is $108 per debenture. The preference shares current market value is $0.60 per share.
The rate of growth of this company is expected to be 8% every year and the current year equity dividend will be $100,000 which is due to be paid. The preference dividend and debenture interest have been already paid. The corporate tax will be 26%
Required:
(a) Calculate the Cost of Equity
(b) Calculate the Cost of Preference Shares
(c) Calculate the Cost of Debt (Redeemable Debentures)
(d) Calculate the Weighted Average Cost of Capital (WACC)
Clear and accurate answers needed with step-by-step explanation, please

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Finance Applications And Theory

Authors: Marcia Cornett, Troy Adair, John Nofsinger

5th Edition

1260013987, 9781260013986

More Books

Students also viewed these Finance questions