QUESTION 3 Abuja Power Generation Company Plc (APGC) is a publicly quoted company on the Nigerian Exchange Group (NGX). The company generates and sells electricity under a Power Purchase Agreement (PPA) with the Nigerian Bulk Electricity Trading Plc (NBET). APGC's Board of Directors is evaluating a N5 billion capital structure for a new 100MW gas-fired power plant. The company's financial data are as follows: Current Capital Structure: - Ordinary shares (N1 par value): 500 million shares in issue - Market price per share: N8.00 - 12% Irredeemable Debentures: N1,000,000,000 (N1 billion) face value, currently trading at N95 per N100 face value - Retained Earnings: N800,000,000 - Corporate tax rate: 30% The Board is proposing to finance the N5 billion new plant using the following mix: - 40% from a new issue of ordinary shares at the current market price - 35% from a new issue of 15% Redeemable Bonds (redeemable at par in 8 years, currently priced at N105 per N100 face value) - 25% from internally generated funds (retained earnings) Required: (a) Calculate the amount of funds to be raised from each of the three proposed sources for the N5 billion plant. (3 marks) (b) Calculate the cost of the existing 12% Irredeemable Debentures (post-tax). (3 marks) (c) Using the approximation method, calculate the post-tax cost of the new 15% Redeemable Bonds. (6 marks) (d) Explain THREE advantages and TWO disadvantages of using Retained Earnings as a source of finance for APGC's expansion. (8 marks) (e) State the key provision of the Companies and Allied Matters Act (CAMA) 2020 that governs the issuance of debentures by a public company in Nigeria. (5 marks) Total: 25 marks