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Kopex Ltd.’s capital structure is as follows: ...

      

Kopex Ltd.’s capital structure is as follows:
Sh. "million"
Ordinary share capital (sh.20 each) 1,920
12% preference share capital (sh.20 each) 1,440
9% debentures 960
4,320

Additional information:
1. The ordinary shares are currently trading on the securities exchange at sh.75 per share.
2. The ordinary dividend for the previous financial year was sh.10.60 per share. The dividend is expected to grow at an annual growth rate of 8% for the foreseeable future.
3. The preference shares have a current market value of sh.20 per shares.
4. The debentures are irredeemable and have current market value of sh.1,080 per sh.1,000 nominal value.
5. Corporation tax rate is 30%.

Required:
(i) Kopex Ltd.’s market weighted average cost of capital (MWACC).
(ii) Explain two reasons why Kopex Ltd. could prefer to use market weights instead of book weights in the computation of the weighted average cost of capital.

  

Answers


Francis
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francis1897 answered the question on November 8, 2022 at 08:05


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