These data are available for B Company at December 31, 20-11.

Current Liabilities : P 2,000,000

Bonds P 1,000 par : 3,000,000

Preference Shares P 20 par : 500,000

Ordinary Equity P 1.00 par : 200,000

Retained Earnings : 6,300,000

The 8.5% coupon bonds are currently selling at 96.5. The preferred shares paid a cash dividend of 10% last year and are now selling at P 18.00/share and will entail floatation costs of P 2.00 per share. Per share of Ordinary equity sells at P 40.00. Last year, ordinary equity paid cash dividend of P 0.80/ share and is to grow at the rate of five percent. If there is need for external ordinary equity, floatation costs of 15% of par will be paid. Company is subject to 40% tax. The estimated cost of bonds is near to

5.3%

8.5%

8.81%

9.94%