Qin Ltd wants to determine its cost of capital to use in future capital budgeting decisions. The

Question:

Qin Ltd wants to determine its cost of capital to use in future capital budgeting decisions. The company’s capital structure is as follows:

Source of capital

Amount

After-tax cost

Borrowings

Preference shares

Ordinary shares

Retained earnings

$600000

200000

1000000

700000

10%

Required

Calculate the company’s cost of capital based on the information available.

Capital Budgeting
Capital budgeting is a practice or method of analyzing investment decisions in capital expenditure, which is incurred at a point of time but benefits are yielded in future usually after one year or more, and incurred to obtain or improve the... Capital Structure
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a... Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...

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