Gce Model Questions Vol1 2019 Commerce Question 15
Practice objective / multiple choice question 15 from the 2019 Gce Model Questions Vol1 Commerce examination.
A firm's capital structure consists of 40\% equity, 30\% preference shares and 30\% debentures. The nominal cost of equity is 12\% (dividend yield), the cost of preference shares is 8\% (dividend yield), and the cost of debentures is 9\% per annum. The corporate tax rate is 35\%, and the flotation costs are 5\% for equity, 4\% for preference shares and 2\% for debentures. Compute the weighted average cost of capital (WACC) for the firm, taking into account the tax shield on interest and the flotation costs. Give your answer as a percentage to two decimal places.
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About This Question
This is Gce Model Questions Vol1 2019 Commerce Question 15. It is one of the objective questions from the 2019 Gce Model Questions Vol1 Commerce examination.
Difficulty level: Medium .
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