Determine the cost of preferred shares for each company. You have collected the following common...
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Determine the cost of preferred shares for each company. You have collected the following common share data from the annual reports of several of your global competitors. 10.3 Current Dividend Market Value Company Dividend Growth Rate Jade Inc. $7.00 $93.00 10.00% Old Irish Ltd. 6.10 98.00 7.20 Tapestry Corp. 4.50 75.00 8.70 Required: Determine the cost of common shares for each company. a A Market value of debt $10 million $16 million The annual growth rate in dividends is 5% for Riphean and 8% for Silurian, Assume a 30% rate of corporate tax Required: (a) Explain what is meant by the term cost of capital and state why it is important for a business to calculate its cost of capital correctly. ch) Calculate the weighted average cost of capital of Riphean and Silurian using the information provided c Discuss two possible reasons why the cost of common share capital differs between the two businesses (d) Discuss two limitations of using the weighted average cost of capital when making investment
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