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Prepare a effective cost of debt

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Reference no: EM132489587

Equit and liabilities are as follow:

18%debentures (shs.1000 at par) 16000

10% preference shares 6250

Ordinary shares(she 10 par) 12500

Rretained earnings 28125

Additional information

1. the debentures are currently selling at shs 950 in the market

2. Company paid dividend of shs 5.00 per ordinary share and they are expected to grow at rate of 10%per annum.

3. the corporate tax is 40%

Required;

Question 1: Effective cost of debt

Question 2: Cost of equity

Question 3: Weighted cost of capital

Reference no: EM132489587

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