Problem: The Kay Company has the following Capital structure as at 31st March, 2019.
|
|
Based on Book Value
|
Based on Market Value
|
% Costs
|
|
Debentures
|
300,000
|
330,000
|
7
|
|
Preference
|
100,000
|
110,000
|
9
|
|
Equity
|
1,500,000
|
1,700,000
|
15
|
|
Debt
|
200,000
|
180,000
|
10
|
Required:
1. Determine the Weighted Average cost of capital using:
a) Book Value weights
b) Market Value weights
2. What are the factors affecting Cost of Capital?
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