Q-3 (A) A company has the following book value capital structure. Sources of Capital Equity Capital...

 

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Q-3 (A) A company has the following book value capital structure. Sources of Capital Equity Capital (10 million shares, Rs.10 par) Reserves & Surplus MFT4CCEF04 9% Preference Capital (0.8 million shares, Rs. 100 par) 11% Debentures (2 million debentures, 100 200 Million par) Company's target capital structure is as follows: Equity Capital Preference Capital Debt Book (Rupees) 100 Million 150 Million 80 Million 60% 10% 30% The risk-free rate is 6.5%, the market risk premium is 6% and the company's beta is 1.2. The market price per share is Rs. 40. Preference shares redeemable after 10 years are selling for Rs. 90. Debentures redeemable after 4 years are selling for Rs. 104. The effective tax rate for the company is 30%. Value Calculate the Weighted Average Cost of Capital of the company (10) based on the market values. Q-3 (A) A company has the following book value capital structure. Sources of Capital Equity Capital (10 million shares, Rs.10 par) Reserves & Surplus MFT4CCEF04 9% Preference Capital (0.8 million shares, Rs. 100 par) 11% Debentures (2 million debentures, 100 200 Million par) Company's target capital structure is as follows: Equity Capital Preference Capital Debt Book (Rupees) 100 Million 150 Million 80 Million 60% 10% 30% The risk-free rate is 6.5%, the market risk premium is 6% and the company's beta is 1.2. The market price per share is Rs. 40. Preference shares redeemable after 10 years are selling for Rs. 90. Debentures redeemable after 4 years are selling for Rs. 104. The effective tax rate for the company is 30%. Value Calculate the Weighted Average Cost of Capital of the company (10) based on the market values.

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The question asks to calculate the Weighted Average Cost of Capital WACC based on the market values of equity preference capital and debt Here are the ... View the full answer