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The joint stock company has a total capital of 330 mil. USD. The company has the following structure of capital:

a. 250 mil. USD of shares where 180 mil. USD are in common stock and 70 mil. USD are in preferred stock

b. Long-term loans is 50 mil. USD with 2 % p.a.

c. Short-term loans is 30 mil. USD with 9 % p.a

Determine the weighted average of capital for following company under these conditions:

I. Income tax is 20 %

II. Preferred stocks have a nominal value of 10 000 USD per share. They are traded for 11 000 USD and guaranteed (promised) a permanent priority dividend 1 000 USD annum per share.

III. Common stocks were issued at a nominal value of 2 000 USD per share. Flotation cost of these new shares were calculated at 50 USD per share. Shares are traded on the market for 2 400 USD per share. Dividend is assumed at 10 % of par value in the first year, where the expected growth of dividends is assumed at 1 % every year.

IV. Long-term loans are provided at a current rate of 1 % every year. V. Short-term loans have a current rate of 10 %. Note: each example should be calculated on seperate shield in Excel Document, and only one Excel Document with your ID and name should be uploaded in Homework Vaults in IS.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92837071

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