Contributed capital represents the total investment that has been paid in to the company by its shareholders as a result of the purchase of stock. Earned capital represents the cumulative net income that has been earned, less the portion of that income that has been paid out to shareholders in the form of dividends. When profit is earned, shareholders have the option of paying out that profit as a dividend or reinvesting the earnings in order to grow the company. In fact, many companies title the Retained Earnings account as Reinvested Earnings. Earned capital, thus, represents an implicit investment by the shareholders in the form of forgone dividends.
The key company has the following capital structure 14% loan 300,000 11% preference share capital 100,000 Equity 1,600,000 2,000,000 The company’s share has a current market price of Sh.24 per share. The expected dividend per share next year is sh.2 , the dividend are expected to grow at 3% annually for the forever. Tax rate is 30%. Required: Calculate the weighted average cost of capita
May 20, 2016
9:53 pm
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