Calculate the company after-tax Weighted Average Cost

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Question - A company's cost of equity capital is 12 percent, and the cost of its debt capital, which consists of loan stock currently traded at par, is 10 per cent. The company receives relief against corporation tax at 30 per cent on interest paid.

The market value of the ordinary shares is £30 million and the market value of the loan stock is £20 million. Calculate the company's after-tax Weighted Average Cost of cost?

Reference no: EM132848544

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