11:30AM SLOT

Question 1

Horizon Ltd. is planning a $50 million expansion. The expansion is to be financed by having a
target capital structure of 40% debt and 60% equity. Horizon Ltd. has Retained Earnings of $24
Million which it can use for financing at a cost of rs=136. Horizon Ltd. can raise additional equity
upto $10 Millionat a cost of re= 15%. The after-tax required return on debt is 9% and 14% for
equity. Ifthe company is in the 40% tax bracket, calculate the Weighted Average Cost of Capital
for Horizon Ltd.

Question 2
Apple's preferred stock has a par value of $100 and pays a preferred dividend of 12 per share.
What is the Cost of Preferred Stockif it is currently selling in the market for $108.50?
 Quiz Paper
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IBA Institute of Student ERPA/D No:

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Business Administration Quiz #: 2 Date
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Full Name: Usama Tehty
IBA nstitute of Student ERP /D No:
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Karachi Class/Section:,
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