Calculate the debenture cost

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Reference no: EM132752764

Information Provided:

Book Value of current assets $35 million and current liabilities $22.95 million
long term loan $6.21 million
retained earnings $22.5million
10% debentures: $26 million debentures issued at $1000
general reserves $7.50 million
preference share capital: 7.5 million shares issued at $3 per share
ordinary share capital: 34 million shares issued at $1 per share
government bonds are currently yielding 6% per annum
the current market return on equity is estimated to be 15.7% per annum
A merchant banker suggests that MRT Ltd would have to offer a rate of 13.4% p.a on any issue of 21 year debentures
debenture coupons are paid semi-annually with 21 years to maturity
the company tax rate is $33
preference shares are currently traded too $2.97 per share ordinary shares have recently traded at $3.68 and the company's financial manager believes that a beta of 2.2 is appropriate for the company

Problem 1: Calculate the Preference Share Cost?

Problem 2: Calculate the Ordinary Share Cost?

Problem 3: Calculate the Loan Cost?

Problem 4: Calculate the Debenture Cost?

Reference no: EM132752764

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