1. Anzac Corporation is looking at issuing new preference shares at $73.07 per share. The shares will pay $6.53 in dividends per year and issue costs are expected to be 3.9% of the issue price. What will be the expected cost of the preference shares?
2. Idea Ltd has a target capital structure of 42% debt with the balance being equity financing. Idea has identified the dollar amount of total new financing at which the company exhausts its available retained earnings is a break point of $1,229,903. Above this level, it must use more expensive new ordinary share financing, and the weighted marginal cost of capital will increase. What must be the maximum available total dollar amount of funds that Idea has from retained earnings?
I known the answer is 0.093 and 713344
but why? how to do it?
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