solution
solution.
TechMara Limited can borrow at an annual interest rate of 9% compounded semiannually with a
compensating balance requirement of 6%. It can issue 14% Taka 100 preferred stock at Taka (100
+ Last two digits of your ID Number) where floatation cost is 6%. Last year, the firm paid dividend
of Taka 44 on common stock, which is expected to grow at 4.5% annually. The firm’s stock is
quoted in the market at Taka (340 + Last two digits of your ID Number). Tax rate is 30%.
Expected Capital Components and their mix:
Debt Taka 900 million
Preferred Stock Taka 400 million
Common Equity Taka 1200 million
(a) Estimate the cost of debt, cost of preferred stock and cost of retained earnings.
(b) Estimate the WACC.
compensating balance requirement of 6%. It can issue 14% Taka 100 preferred stock at Taka (100
+ Last two digits of your ID Number) where floatation cost is 6%. Last year, the firm paid dividend
of Taka 44 on common stock, which is expected to grow at 4.5% annually. The firm’s stock is
quoted in the market at Taka (340 + Last two digits of your ID Number). Tax rate is 30%.
Expected Capital Components and their mix:
Debt Taka 900 million
Preferred Stock Taka 400 million
Common Equity Taka 1200 million
(a) Estimate the cost of debt, cost of preferred stock and cost of retained earnings.
(b) Estimate the WACC.
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