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Weighted average cost of capital

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Reference no: EM133116433

ABC company has the following capital structure as on 30 June 2020

Ordinary share (200,000 shares) sh 4,000,000

10% preference shares ( 100,000) 1,000,000

14% debentures 3,000,000

Total 8,000,000

The share of the company sells for sh 20. It is expected that the company will pay next year a dividend of sh 2 per share which will grow at 7% forever. The preferred stock is selling at par. Assume a 30% tax rate.

Required:

The weighted average cost of capital on the existing capital structure.

Reference no: EM133116433

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