ventureInvestments Ltd. wishes to raise funds amounting to Sh.20million to finance a project in the following manner:

Sh.15 million from debt; and

Sh.5 million from floating new ordinary shares.

The present capital structure of the company is made up as follows:

1.600,000 fully paid ordinary shares of Sh.10 each

2.Retained earnings of Sh.6 million

3.200,000, 10% preference shares of Sh.20 each.

4.40,000 6% long-term debentures of Sh.120 each.

The current market value of the company's ordinary shares is Sh.50 per share.The expected ordinary share dividends in a year's time is Sh.2.00 per share.The average growth rate in both dividends and earnings has been 15% over the past ten years and this growth rate is expected to be maintained in the foreseeable future.

The company's long-term debentures currently change hands for Sh.100 each.The debentures will mature in 100 years.The preference shares were issued four years ago and still change hands at face value.

Required:

Compute the component cost of:

oOrdinary share capital;(3 marks)

oDebt capital(3 marks)

oPreference share capital.(3 marks)