The firm has K.10 million ordinary shares issued at par value of K1 each but currently trading at K0.5 per share. It recently paid a dividend of K2.6 per share and five years ago paid K1.1 per share. The firm also has a 10% bond worth K4 million issued at par value of K1,000 each that matures in 5 years and currently trades at K1,095. Using the market values, calculate the firm's weighted average cost of capital.
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11) A firm has K-10million ordinary shares issued at par value of K1 w.docx
1. 11) A firm has K.10million ordinary shares issued at par value of K 1 with market share price of
K /2 . The firm has just paid a dividend of K2.6 per share and five years ago the firm had paid
dividend per share of K 1.1 per share. The firm has a 10% bond amounting to K 4 million issued
at par value of K 1 , 000 with five years to maturity currently trading market price of K 1 , 095 .
Calculate the cost of capital using the market values. 12) A firm has an equity beta of 1.105 and
the market expected rate of return is 25% . The firm has in issue a 10% irredeemable bond issued
at par value of K 1 , 000 with market price of K 1 , 112 . The interest rate of government bond is
8% . Calculate the cost of capital.