You are provided with the following information relating to V ltd
Equity and liabilities
12% debentures (shs1000 at par) 16,000
10% preferences shares 6,250
Ordinary shares (Shs 10 par) 12,500
Retained earnings 28,125
Additional information
i. The debentures are currently selling at Shs 950 in the market
ii. Company paid a dividend of Shs 5.00 per ordinary share and they are expected to grow at a rate of 10% per annum.
iv. The corporation tax is 40%
Required
Effective Cost of debt (3 marks)
Cost of equity (3 marks)
Weighted Average cost of capital (4 marks)
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