You have been asked to calculate the cost of capital of Mulligan Ltd, a company which...

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You have been asked to calculate the cost of capital of Mulligan Ltd, a company which specialises in developing new medical equipment products. The following information is available regarding the capital structure of the company. Mulligan Ltd currently has 850,000 €1 ordinary shares in issue. The shares currently have a market value of €2.60 per share. The company has just paid a dividend of €0.07 per share. Dividends have grown solidly over the last few years: ● Year 2018 2019 2020 2021 2022 Dividends €60,000 €62,000 €65,000 €69,000 €72,000 Mulligan has also issued 410,000 €1 7% irredeemable preference shares. They are currently trading at €1.45 and the dividend is due to be paid in three weeks time. Mulligan also has €900,000 5.5% redeemable debentures in issue. The debentures are due for redemption at par in four years' time. The current market price of the debentures is €95. Assume a corporation tax rate of 20%. You have been asked to calculate the cost of capital of Mulligan Ltd, a company which specialises in developing new medical equipment products. The following information is available regarding the capital structure of the company. Mulligan Ltd currently has 850,000 €1 ordinary shares in issue. The shares currently have a market value of €2.60 per share. The company has just paid a dividend of €0.07 per share. Dividends have grown solidly over the last few years: ● Year 2018 2019 2020 2021 2022 Dividends €60,000 €62,000 €65,000 €69,000 €72,000 Mulligan has also issued 410,000 €1 7% irredeemable preference shares. They are currently trading at €1.45 and the dividend is due to be paid in three weeks time. Mulligan also has €900,000 5.5% redeemable debentures in issue. The debentures are due for redemption at par in four years' time. The current market price of the debentures is €95. Assume a corporation tax rate of 20%.

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Answer To calculate the cost of capital for Mulligan Ltd we need to find the cost of each component of its capital structure ordinary shares preferenc... View the full answer