Friday

April 18, 2014

April 18, 2014

Posted by **Majid** on Sunday, April 10, 2011 at 5:30am.

2)You are required to determine the weighted average cost of capital (K) of the K.C. Ltd. using (i) book value weights; and (ii) market value weights. The following information is available for you perusal. The K.C. Ltd.’s present book value capital structure is:

Debentures (Rs. 100 per debenture) 8,00,000

Preference shares (Rs. 100 per share) 2,00,000

Equity shares (Rs. 10 per share) 10,00,000

20,00,000

All these securities are traded in the capital markets. Recent prices are debentures @ Rs. 110, preference shares @ Rs. 120 and equity shares @ Rs. 22. Anticipated external financing opportunities are:

Rs. 100 per debenture redeemable at par : 20-year maturity, 8% coupon rate, 4% flotation costs, sale price Rs. 100.

Rs. 100 preference share redeemable at par: 15-year maturity, 10% dividend rate, 5% floatation costs, sale price Rs. 100.

Equity shares Rs. 2 per share flotation costs, sale price Rs. 22.

In addition, the dividend expected on the equity share at the end of the year Rs. 2 per share; the anticipated growth rate in dividends in 5% and the company has the practice of paying all its earning in the dorms of dividends. The corporate tax rate is 50%

- Capital Investment and Financing Decisions. -
**Writeacher**, Sunday, April 10, 2011 at 9:57amPlease note that

**we don't do students' homework**for them. Be sure to go back into your textbook or use a good search engine. http://hanlib.sou.edu/searchtools/

Once**YOU**have attempted to answer**YOUR**questions, please re-post and let us know what you think. Then someone here will be happy to comment on your thinking.

**Related Questions**

present value - The present value P that will amount to A dollars in n years ...

Business Mathematics - Jungle Jim owes three debts: $500 due in one year plus ...

math - find the present value of ordinary annuity payments of 890 each year for ...

Math - The present value of an annuity due of $400 payable semi-annually is $...

value of money - Billy Burnett's grandfather willed Billy $10,000 payable on his...

Compound Interest : Future Value and Present Value - Payments of $1800 and $2400...

business math-73 - Use the Present Value Table on page 358 of your text to ...

Math - Jungle Jim owes three debts: $500 due in one year plus interest at 6% ...

Mathematics - In the problems 1 to 3, find the present value of the given (...

Finance - Investment X offers to pay you $6,000 per year for nine years, whereas...