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Illustrations
1. K P Incorporation is having the following capital structure in the market
value term. The common share sells for $25 a share, and the company
has a marginal tax rate of 40 %. The current year dividend of the firm is
$2.80 with a growth rate in the payments of dividends of 4 percent.
Compute the simple average cost of capital, and weighted average cost of
capital.
2. ZETA Limited is having the following capital structure. The company
has a marginal tax rate of 40 %. The current year dividend of the firm is
$16 with a growth rate in the payments of dividends of 6 percent.
Compute the simple average cost of capital, and weighted average cost of
capital.
$
3. The Simma products corporations have the following capital structure,
which it considers optimal:
Bonds, 7% (at par) Br 300,000
Preferred stock,Br.5