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Plus Ten Company needs Tk. 40,00,000 for the expansion of its business. The manager of...

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Finance

Plus Ten Company needs Tk. 40,00,000 for the expansion of its business. The manager of the

company decided to raise the funds as follows:

  1. The firm plans to issue 8% bond with a face value of 1000 for 10 years for Tk. 15,00,000. The tax rate of the firm is 34%.
  2. Issuing 10% preferred stock for Tk.100 each with flotation cost of 5% for collecting

Tk. 12, 00,000.

  1. Issuing common stock for the remaining capital with Tk. 100 each. The company needs to pay Tk. 3 per share as flotation cost. The current dividend is Tk. 18 per share and the dividend payout ratio is 35% where the return from its investment is 14%. From the above data calculate -
    1. The cost of each components of capital structure.
    2. The WACC with the component of capital.

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