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The following is the existing capital structure of Company XYZ Ltd.:

•    Ordinary shares at Shs.10 par 1,000,000
•    Retained 800,000
•    12% preference shares Shs.10 par 400,000
•    16% loan Shs.100 par 300,000
•    Total capital employed Shs. 2,500,000
•    The company’s ordinary shares have a dividend cover of 3 times and pays a dividend of 10% on its ordinary share capital.
•    Ordinary shares sells at Shs.18
•    Preference shares sell at Shs.15
•    Debentures are selling at par. The tax rate is 30%

Compute:

a)Growth in Equity.
b)W.A.C.C.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M9447

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