Question
The joint stock company has a total capital of 330 mil. USD. The company has the following structure of capital: 250 mil. USD of shares
The joint stock company has a total capital of 330 mil. USD. The company has the following structure of capital:
250 mil. USD of shares where 180 mil. USD are in common stock and 70 mil. USD are in preferred stock
Long-term loans is 50 mil. USD with 2 % p.a.
Short-term loans is 30 mil. USD with 9 % p.a.
Determine the weighted average of capital for following company under these conditions:
Income tax is 20 %
Preferred stocks have a nominal value of 10 000 USD per share. They are traded for 11 000 USD and guaranteed (promised) a permanent priority dividend 1 000 USD annum per share.
Common stocks were issued at a nominal value of 2 000 USD per share. Flotation cost of these new shares were calculated at 50 USD per share. Shares are traded on the market for 2 400 USD per share. Dividend is assumed at 10 % of par value in the first year, where the expected growth of dividends is assumed at 1 % every year.
Long-term loans are provided at a current rate of 1 % every year.
Short-term loans have a current rate of 10 %.
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