Ordinary share capital Sh. 10 par value ksh. 400,000,000 Retained earning Ksh. 200,000,000 10% preference share capital sh. 20 par value Ksh. 100,000,000 12% debentures sh. 100 par value Ksh. 200,000,000 Preference share was issued 10 years ago and are still selling at par value MPS=Par value. The debentures is currently selling at sh. 90 in the market. Curently the firm has been paying divinded per share of sh. 5. The DPS is expected to grow at 5% p.a in future. The current market price per share (MPS) is sh. 40. The corporate tax rate is 30% A. Compute the cost of each capital component. B. Determine the WACC of the firm
Ordinary share capital Sh. 10 par value ksh. 400,000,000 Retained earning Ksh. 200,000,000 10% preference share capital sh. 20 par value Ksh. 100,000,000 12% debentures sh. 100 par value Ksh. 200,000,000 Preference share was issued 10 years ago and are still selling at par value MPS=Par value. The debentures is currently selling at sh. 90 in the market. Curently the firm has been paying divinded per share of sh. 5. The DPS is expected to grow at 5% p.a in future. The current market price per share (MPS) is sh. 40. The corporate tax rate is 30% A. Compute the cost of each capital component. B. Determine the WACC of the firm
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
Section: Chapter Questions
Problem 1PS
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The following is the capital structure of company ABC as at 31/12/2017
Ordinary share capital Sh. 10 par value ksh. 400,000,000
10%
12% debentures sh. 100 par value Ksh. 200,000,000
- Preference share was issued 10 years ago and are still selling at par value MPS=Par value.
- The debentures is currently selling at sh. 90 in the market.
- Curently the firm has been paying divinded per share of sh. 5.
- The DPS is expected to grow at 5% p.a in future. The current market price per share (MPS) is sh. 40.
- The corporate tax rate is 30%
A. Compute the cost of each capital component.
B. Determine the WACC of the firm
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