Extract from balance sheet of potaris ltd is given below Source Description Amount Equity Share capital 500lac
Question:
Extract from balance sheet of potaris ltd is given below
Source Description Amount
Equity Share capital 500lac shares of face value Rs 10 each Rs5000 lacs
Reserve and surplus Rs2000 lacs
Preference shares carrying 8% pref dividend 6lac pref shares of face value Rs100 each Rs 600 lacs
Bank loan 11% p.a interest rate Rs 4000 lacs
The following additional information is given Current market price of the equity shares of Polaris is Rs 80 while that of the preference shares is Rs 93 Polaris has maintained a consistent dividend of Rs 15 per share and the same is expected to continue in future The preference shares are redeemable at a premium of 5% on their face value, after 4 years The bank loan is repayable after years Tax rate is 30% Calculate weighted average cost of capital using (a) Book Value Weights, and (b) Market Value weights.