The company has the structure of capital

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Reference no: EM131999422

The joint stock company has a total capital of 330 mil. USD. The company has the following structure of capital:

a. 250 mil. USD of shares where 180 mil. USD are in common stock and 70 mil. USD are in preferred stock

b. Long-term loans is 50 mil. USD with 2 % p.a.

c. Short-term loans is 30 mil. USD with 9 % p.a

Determine the weighted average of capital for following company under these conditions:

I. Income tax is 20 %

II. Preferred stocks have a nominal value of 10 000 USD per share. They are traded for 11 000 USD and guaranteed (promised) a permanent priority dividend 1 000 USD annum per share.

III. Common stocks were issued at a nominal value of 2 000 USD per share. Flotation cost of these new shares were calculated at 50 USD per share. Shares are traded on the market for 2 400 USD per share. Dividend is assumed at 10 % of par value in the first year, where the expected growth of dividends is assumed at 1 % every year.

IV. Long-term loans are provided at a current rate of 1 % every year. V. Short-term loans have a current rate of 10 %. Note: each example should be calculated on seperate shield in Excel Document, and only one Excel Document with your ID and name should be uploaded in Homework Vaults in IS.

Reference no: EM131999422

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