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The manager of a firm wishes to calculate its weighted average cost of capital and the following information relates to the company at the current
The manager of a firm wishes to calculate its weighted average cost of capital and the following information relates to the company at the current time:
Number of ordinary shares 9.5 million
Number of preferred shares 3.8 million
Book value of 6%-coupon bond $38 million
Market price of ordinary shares $4 per share
Market price of preferred shares $5 per share
Current dividend of preferred shares $0.35
Market value of bond $950 per $1000 bond
Equity beta of the firm 1.6
Risk-free rate of return 3.8%
Average market return 10.8% Rate of taxation 25%
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