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Hi sir, how do i work out the following question below. The par value of the loan notes is not given.
Qn ) Gobi Co has irredeemable 4% loan notes in issue with a nominal value of $20million. The current market value of the loan notes is $10million and the tax rate is 25% . The equity shares of Gobi Co have a total market capitalisation of $30million. The company’s weighted average cost of capital is 10%.
What is the cost of equity ?
Answer: 11.3%
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