Question 3 Kea (Pty) Ltd. has the following capital...
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Kea Pty Ltd has the following capital structure as of February :
ZAR
Debentures @ interest pa million
Preference shares @ dividend million
ordinary shares of R each million
The ordinary shares of the company are quoted at R and the company is expected to declare a dividend of R per share for The company has registered a dividend growth rate of which is expected to be maintained. The tax rate applicable to the company is
Calculate:
The weighted average cost of capital. Marks
The revised weighted average cost of capital, if the company raises an additional term loan of R million at interest pa for expansion. In such a situation the company can increase the dividend from R to R per share but the market price of the share would go down to R Marks
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