Answer to Question #240365 in Economics for Mwila

Question

Company C is a large firm listed on the LuSE. It has the following capital structure:

K mil

Debt – 5 yrs; 8% 25

Preferred Stock – 5% coupon, K100 par 15

Common Equity – K100 par 10

Retained Earnings 23

The current dividend for the company is K 50/share and is expected to grow at 3% per year in the foreseeable future. The equity shares trade at K 450/share. The preferred shares trade at K104/share. The debt currently trades at K 900 per K1,000 nominal value bond.

Required:

Calculate the firm’s WACC.

Answer 1

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