Compute and solve the weighted average cost of capital

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Reference no: EM132646390

James Brown Limited has one million ordinary shares in issue. It also has 500 000 preference shares in issue with a preference dividend of 6% on price and currently sells for R3 per share. In its capital structure, it has 200 bonds outstanding, with a coupon rate of 9%. The bonds have 10 years to maturity and the yield-to-maturity is 12% (YTM). The equity shares currently sell for R2 each and have a beta of 0.9. The market risk premium is 8%, T-bills are yielding 7%. James Brown's tax rate is 30%.

Question 1: Calculate the weighted average cost of capital.

Reference no: EM132646390

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