The CMD Ltd has the following specific cost of capital along with the indicated book and...

 

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The CMD Ltd has the following specific cost of capital along with the indicated book and market value weights: Type of capital Cost Book value weights Market value weights Equity 0.18 0.50 0.58 Preference shares 0.15 0.20 0.17 Long-term debt 0.07 0.30 0.25 1.00 1.00 (i) Calculate the weighted cost of capital, using book and market value weights. (ii) Calculate the weighted average cost of capital, using marginal weights, if the company intends to raise the needed funds using 50 per cent long-term debt, 35 per cent preference shares and 15 per cent retained earnings. The CMD Ltd has the following specific cost of capital along with the indicated book and market value weights: Type of capital Cost Book value weights Market value weights Equity 0.18 0.50 0.58 Preference shares 0.15 0.20 0.17 Long-term debt 0.07 0.30 0.25 1.00 1.00 (i) Calculate the weighted cost of capital, using book and market value weights. (ii) Calculate the weighted average cost of capital, using marginal weights, if the company intends to raise the needed funds using 50 per cent long-term debt, 35 per cent preference shares and 15 per cent retained earnings.

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i K based on book value BV weights and market value ... View the full answer