The following is an extract from the Statement of Financial Position of LI Co, a company...

 

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The following is an extract from the Statement of Financial Position of LI Co, a company in the same industry as KJI, at 31 December 20X9. Ordinary shares of 50c each Reserves 9% preference shares of $1 each 14% loan notes Total long-term funds $'000 5,200 4,850 4,500 5,000 19,550 The ordinary shares are quoted at 80c. Assume the market estimate of the next ordinary dividend is 4c, growing thereafter at 12% per annum indefinitely. The preference shares which are irredeemable are quoted at 72c and the loan notes are quoted at par. Tax on profits is 33%. Required Use the relevant data above to calculate the company's weighted average cost of capital (WACC), ie the return required by the providers of the three types of capital, using the respective market values as weighting factors. The following is an extract from the Statement of Financial Position of LI Co, a company in the same industry as KJI, at 31 December 20X9. Ordinary shares of 50c each Reserves 9% preference shares of $1 each 14% loan notes Total long-term funds $'000 5,200 4,850 4,500 5,000 19,550 The ordinary shares are quoted at 80c. Assume the market estimate of the next ordinary dividend is 4c, growing thereafter at 12% per annum indefinitely. The preference shares which are irredeemable are quoted at 72c and the loan notes are quoted at par. Tax on profits is 33%. Required Use the relevant data above to calculate the company's weighted average cost of capital (WACC), ie the return required by the providers of the three types of capital, using the respective market values as weighting factors.

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The W ACC is calculated as Ord ina... View the full answer