The following is the existing capital structure of Company XYZ Ltd.:
• Ordinary shares at Shs.10 par 1,000,000
• Retained 800,000
• 12% preference shares Shs.10 par 400,000
• 16% loan Shs.100 par 300,000
• Total capital employed Shs. 2,500,000
• The company’s ordinary shares have a dividend cover of 3 times and pays a dividend of 10% on its ordinary share capital.
• Ordinary shares sells at Shs.18
• Preference shares sell at Shs.15
• Debentures are selling at par. The tax rate is 30%
Compute:
a)Growth in Equity.
b)W.A.C.C.