Qantas Is Discussing New Ways to Recapitalise and Raise Additional

question 86

Multiple Choice

Qantas is discussing new ways to recapitalise and raise additional capital. Its current capital structure has a 20% weight in ordinary shares, 10% in preference shares and 70% in debt. The cost of equity capital is 14%, the cost of preference shares is 10%, and the pre-tax cost of debt is 9%. What is the weighted average cost of capital for Qantas if its marginal tax rate is 30%?

• A)7.87%
• B)9.21%
• C)8.21%
• D)8.89%

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