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Old Tuesday, January 09, 2018
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Default Please solve this question
You have just the following information about ABC Ltd, which pays tax @
35% p.a
(i) 7000 Bonds with 8% coupon, face value of $1000 & maturity period of
15 years, payments to be made semi-annually, currently sold at 90% of
par value.
(ii) 300,000 common shares outstanding, currently selling at $ 60 per share
having beta of 1.10.
(iii) 20,000 outstanding shares of $6 preferred shares, selling at $95 per
share.
Required: Work out overall cost of capital assuming 7% market risk premium
and 5% risk free rate of return.
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