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a)The AL Marai Company has just paid a dividend of $4 per share and this dividend is expected to grow at the rate of 10% every year
a)The AL Marai Company has just paid a dividend of $4 per share and this dividend is expected to grow at the rate of 10% every year. The required rate of return is 21%. What is the current market value of the ordinary share? (2 marks)
b) A preference share has a net price of $42 and the preference share pays a $5 dividend. What is the cost of the preference share? (1 mark)
c) A company’s debenture has a coupon rate of 16% and the company has a tax rate of 36%, what is the company’s cost of debt? (2 marks)
(Rubrics: question 2a and 2c each carry 2 marks for a correct calculation. Question 2b
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