Question
(V V Urgent) Ahmed Corporation is constructing is cost of capital schedule. The target capital structure is based on the market values of the companys
(V V Urgent) Ahmed Corporation is constructing is cost of capital schedule. The target capital structure is based on the market values of the companys outstanding securities. It has 22,500 bonds outstanding with a 12% coupon, paid semiannually, a current maturity of 20 years, and sell for Rs.1020 each. The yield to maturity of these bonds is 11.74%. The firm could sell Rs.100 preferred stock which pays a 12 % annual dividend for Rs.95 each. Ahmed currently has 225,000 shares of preferred stock outstanding. Ahmed is a constant growth firm which just paid a dividend of Rs.2.00 on its common stock which sells for Rs.27 per share, and has an expected growth rate of 10%. There are currently 2,500,000 shares of common stock outstanding. The firms marginal tax rate is 40%. Please estimate their weighted average cost of capital _____%
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