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The manager of a firm wishes to calculate its weighted average cost of capital and the following information relates to the company at the current time:

Number of ordinary shares 9.5 million

Number of preferred shares 3.8 million

Book value of 6%-coupon bond $38 million

Market price of ordinary shares $4 per share

Market price of preferred shares $5 per share

Current dividend of preferred shares $0.35

Market value of bond $950 per $1000 bond

Equity beta of the firm 1.6

Risk-free rate of return 3.8%

Average market return 10.8% Rate of taxation 25%

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92778442

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