Firm weighted average cost of capital

Reference no: EM131016355

A company has the following long-term capital outstanding as on 31 March 2016:

a. 10% debentures with a face value of $500 000. The debentures were issued in 2008 and are due on 31 March 2016. The current market price of a debenture is $950.

b. Preference shares with a face value of $400 000. The annual dividend is $6,00 per share. The preference shares are currently selling at $60,00 per share.

c. Sixty thousand ordinary shares of $10,00 par value. The share is currently selling at $50,00 per share. The dividends per share for the past several years are as follows:

Year $ Year $

2008 2,00 2012 2,80

2009 2,16 2013 3,08

2010 2,37 2014 3,38

2011 2,60 2015 3,70

Required: Assuming a tax rate of 35%, compute the firm's weighted average cost of capital (WACC)

Reference no: EM131016355

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