Questionbelow is abc shippings source of capital

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Reference no: EM13381262

Question

Below is ABC Shipping's source of capital structure:

Source of capital

Market Value

Cost

Long-tenn debts

$ 8

500

000

5.0%

Preference shares

$ 1

500

000

14.0%

Ordinary shares

$15

000

000

?

The ordinary sl are equity has a beta of 1.2. The risk-free rate is 6% and the market return is 11%.

a What is the cost of equity?

b The company tax rate is 30%. Calculate the Weighted Average Cost of Capital (WACC) for the company.

Reference no: EM13381262

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