On 31 March 2021 a company has the following capital structure in the capital employed section of its statement of financial position. 50 000 Ordinary shares of $5= $250 000, Share premium 150 000, Retained income 1 500 000, 15 % Preference shares of $8= $200 000, 18% Debentures 600 000, In addition the company plans to use an average of $300 000 in bank overdraft with cost of 12%. The company`s tax rate is 30% and the return expected by ordinary dividends is 20%. Calculate the company`s weighted average cost of capital

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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On 31 March 2021 a company has the following capital structure in the capital employed section of its statement of financial position. 50 000 Ordinary shares of $5= $250 000, Share premium 150 000, Retained income 1 500 000, 15 % Preference shares of $8= $200 000, 18% Debentures 600 000, In addition the company plans to use an average of $300 000 in bank overdraft with cost of 12%. The company`s tax rate is 30% and the return expected by ordinary dividends is 20%. Calculate the company`s weighted average cost of capital

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