The following information was obtained from the books of Mwangi ltd for the year ended 31st December 2018. Capital structure As 31.12.2018 Ksh Ordinary share capital(par value ksh 30) 4,600,000 8% preference shares (par value ksh 25) 3,400,000 15% debentures stock (issue price ksh 100) 800,000 20% bank loan 2,200,000 Additional information; The market price is as follows Ordinary shares ksh 50 8% preference shares ksh 22 15% debentures ksh 90 The company has maintained a dividend per share of ksh 5 per annum and it is expected to grow in perpetuity at 2% Corporation tax is at 30%. Required a) Compute the cost of each source of capital b) Calculate the Weighted Average Cost of Capital
The following information was obtained from the books of Mwangi ltd for the year ended 31st December 2018.
Capital structure
As 31.12.2018
Ksh
Ordinary share capital(par value ksh 30) 4,600,000
8%
15% debentures stock (issue price ksh 100) 800,000
20% bank loan 2,200,000
Additional information;
The market price is as follows
- Ordinary shares ksh 50
- 8% preference shares ksh 22
- 15% debentures ksh 90
The company has maintained a dividend per share of ksh 5 per annum and it is expected to grow in perpetuity at 2%
Corporation tax is at 30%.
Required
a) Compute the cost of each source of capital
b) Calculate the Weighted Average Cost of Capital
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
