Neco 2024 Commerce Question 9

A small manufacturing firm needs to raise ₦10,000,000. It can obtain a bank loan at 12\% per annum, a bond issue at 10\% (interest payable annually), and issue new equity with an expected return of 18\% by shareholders. The firm wants the proportion of debt (loan + bond) not to exceed 40\% of total finance, and the proportion of equity to be at least 30\%. After tax, the cost of debt is 8\% (tax rate 33\%). Determine the mix of financing (amount from loan, bond, equity) that minimises the weighted average cost of capital (WACC) while satisfying the constraints. Assume the loan and bond have the same after‑tax cost (8\%). Provide the amounts for each source and the resulting WACC (to two decimal places).