Calculate the cost of preference share capital

Assignment Help Financial Management

Reference no: EM131896855

Ron’s Online Bookstore Ltd is expanding and they need capital to purchase servers, computers and a new warehouse. It has decided that it needs to issue more shares on the stock market. It has also decided that it will offer preference shares and ordinary shares. The preference shares have a part value of $80 and pay a 5% dividend. To float the preference shares, they will have to pay their investment bank a floatation cost of 2%.

The company has a beta of 1.15 and there is a market return of 12%. The risk free rate is currently 5%.

Calculate the cost of preference share capital.

Calculate the cost of ordinary share capital.

Reference no: EM131896855

Questions Cloud

Planning to introduce new product in the market : An electronics manufacturing company is planning to introduce a new product in the market. Determine the SE and correlation coefficient for the CER developed.

Calculate the after-tax rate of return : calculate the after-tax rate of return, the real return and the total monetary return. What are the implications of this result for cash management decisions

What causes the differences between the two firms waccs : Are the WACCs what you would expect? What causes the differences between the two firms' WACCs?

Calculate the? after-tax return-marginal tax bracket : The? after-tax return of a 6.09 percent, 20-year,? A-rated corporate bond for an investor in the 15 percent marginal tax bracket is ?

Calculate the cost of preference share capital : Calculate the cost of preference share capital. Calculate the cost of ordinary share capital.

What is the optimal replacement cycle for each truck : What is the optimal replacement cycle for each truck? whick one should FedEx purchase.

Describe the three bond theorems : List and describe the three Bond Theorems.

Arbitrage profit if market price of the put option : Determine the arbitrage profit if the market price of the put option is $5 by the end of January.

Determine the value of six-month european call option : Determine the value of a six-month European call option on the shares of HSBC with a strike price of $65 using a binomial option pricing model.

User Account

All Pages