PQR Company has a capital project of $700,000 for 2017. The Debt: equity ratio of 45.55 will

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PQR Company has a capital project of $700,000 for 2017. The Debt: equity ratio of 45.55 will be maintained. Other relevant information is as follows:-

Cost of debt = 10% pa

Current market share= $22

Latest dividend/ share paid was %1.50

Growth rate is assumed to be 8%

Flotation cost ( issue of new shares)= 15%

Expected before tax annual earnings = $480,000

Payout ratio= 40%

Tax rate = 20%

Required

Calculate the relevant weighted average cost of capital for PQR company (show all necessary working).

Related Book For answer-question

Advanced Accounting

ISBN: 978-1934319307

2nd edition

Authors: Susan S. Hamlen, Ronald J. Huefner, James A. Largay III

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Posted Date: Apr 05, 2024 02:13 AM

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PQR Company has a capital project of $700,000 for 2017. The Debt: equity ratio of 45.55 will

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Advanced Accounting

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