GEE Limited need to raise finance to expand its product range. In the last board meeting, it
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Question:
GEE Limited need to raise finance to expand its product range. In the last board meeting, it was agreed that the additional Kenya Shilling 40 million be raised as follows: i. 100,000 new ordinary shares par value of Kes. 175, will now be sold at Kes 200 per share. The floatation cost of the ordinary shares is 20% and the share is expected to grow at a rate of 5% and cam a divided of Kes 20 per Annum.
Issue 50,000 Preference shares with a market value of Kes. 100 each. The cost of preference shares was agreed to be 12% ili. Raise Kes 15 million from a financial institution. The before tax cost of debt is 15%.
Considering the prevailing rate of corporate tax is 20%, calculate the Weighted Average cost of capital for GEE Lid.
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