CFC is a company that deals with general supplies. The CFO has invited you to a meeting to discuss proposed investment projects for the company. You have been requested to compute the overall cost of capital of the firm as this will be used to evaluate the projects.The following information has been provided to aid in the computation. (i)The company has a cost of equity of 12%, an after-tax cost of debt of 5%, and a cost of preference stock of 10%. (ii) CFC has 10,000 outstanding ordinary shares that are currently trading at Sh.46 per share. (iii) The firm has 5,000 outstanding preference shares issued at a price of Sh.58 a share. (iv) The firm issued 2,000 debentures whose par value is Shs. 105.The current market price is Shs.100. Required: Compute the firm's weighted average cost of capital (WACC).
CFC is a company that deals with general supplies. The CFO has invited you to a meeting to discuss proposed investment projects for the company. You have been requested to compute the overall cost of capital of the firm as this will be used to evaluate the projects.The following information has been provided to aid in the computation.
(i)The company has a
(ii) CFC has 10,000 outstanding ordinary shares that are currently trading at Sh.46 per share.
(iii) The firm has 5,000 outstanding
(iv) The firm issued 2,000 debentures whose par value is Shs. 105.The current market price is Shs.100.
Required:
Compute the firm's weighted average cost of capital (WACC).
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