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please answer Question C only. Q1. JR Plc is considering raising M100 000 by...

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Accounting

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please answer Question C only.

Q1. JR Plc is considering raising M100 000 by issuing 10% debentures. At present, its capital consists entirely of ordinary shares, being 200 000 25cents ordinary shares valued at 40cents "cum. div.", and the dividend which is about to be paid is 4cents. Dividends have been stable for several years but if the company's level of gearing is altered by the raising of these debentures, it is felt that the ordinary shareholders will require a rate of return of 15% with the market value remaining unaltered. Required: (a) Calculate the future dividend payment if the debentures are issued (b) Calculate the marginal cost of debentures for JR PIC (c) Calculate the company's weighted average cost of capital (4 marks). (11marks) (6marks)

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