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{"ops":[{"insert":"(a)\tCompany A is funded as follows:\n\nBalance Sheet Extract\nOrdinary Shares (50n)\t\tK 2000\n12% Loan Notes \t\t\t1500\n8% Preference Shares (K1) \t500\nDetails on these are as follows:\nThe company has an equity beta of 1.2. Government bonds are currently trading at 6% and the average market risk premium is 7%.\nThe Loan notes are currently trading at K106 per K100 note (and assume that the before tax cost of debt is now 10%).\nThe preference shares are trading at K0.92.\nThe current share price is K1.25.\nThe tax rate is 30%.\nCalculate the Weighted Average Cost of Capital\n(b)\tCompany B currently has 5 million preferred shares outstanding. The shares have a par value of K22.50 per share and their current price is K25 per share. B\u2019s tax rate is 40% and flotation costs on a new issue of preferred shares are 5%.\u00a0\nWhat per-share dividend are the preferred shares paying if the component cost of the preferred shares in a weighted average cost of capital calculation is 8.25%?\n\t\t\t\n\n"}]}

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