Calculate the WACC using the following: a. Book value weights b. Market value weights The capital...

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Calculate the WACC using the following: a. Book value weights b. Market value weights The capital structure of the company is as under: Particulars Debentures (2100 per debenture) Preference Shares (100 per share) Equity Shares (10 per share) The market prices of these securities are: Debentures: 105 per debenture Preference shares: 110 per preference share Equity shares: 224 per equity share Amount (in 2) 5,00,000 5,00,000 10,00,000 20,00,000 Additional information: 1. 100 per debenture redeemable at par, 10% coupon rate, 4% flotation costs, 10-year maturity. 2. 100 per preference share redeemable at par, 5% coupon rate, 2% flotation costs, 10-year maturity. 3. Equity shares have 24 flotation cost and market price of 24 per share. The next year expected dividend is 1 with annual growth of 5%. The firm has a practice of paying all earnings in the form of dividend. Corporate tax rate is 30%. Use YTM method to calculate cost of debentures and preference shares. Calculate the WACC using the following: a. Book value weights b. Market value weights The capital structure of the company is as under: Particulars Debentures (2100 per debenture) Preference Shares (100 per share) Equity Shares (10 per share) The market prices of these securities are: Debentures: 105 per debenture Preference shares: 110 per preference share Equity shares: 224 per equity share Amount (in 2) 5,00,000 5,00,000 10,00,000 20,00,000 Additional information: 1. 100 per debenture redeemable at par, 10% coupon rate, 4% flotation costs, 10-year maturity. 2. 100 per preference share redeemable at par, 5% coupon rate, 2% flotation costs, 10-year maturity. 3. Equity shares have 24 flotation cost and market price of 24 per share. The next year expected dividend is 1 with annual growth of 5%. The firm has a practice of paying all earnings in the form of dividend. Corporate tax rate is 30%. Use YTM method to calculate cost of debentures and preference shares.

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ANSWER To calculate the Weighted Average Cost of Capital WACC using both book value weights and market value weights we first need to calculate the co... View the full answer