The management of the company ABC wants to calculate the companys weighted average cost of capital The relevant data pertaining to capital structure is as follows Rs in million 18 preference shares (face value of Rs 10 per share) 125 Equity share capital (face value of Rs 10 per share) 385 Reserves 500 18 long term loans 325 15 debentures 230 Total 1,565 The management of the company gathered following additional information Current ex dividend preference shares price (Rupees) 12 5 Current ex dividend equity shares price (Rupees) 28 Current ex interest debenture market value (Rupees) 110 Equity beta of the company 0 8 Stock market risk premium 9 5 Yield on long term risk free security 5 5 The par value of the debentures is Rs 100, which will be redeemed in 4 years and interest is paid on annual basis The company uses a tax rate of 31 , ignoring flotation costs

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Question: The management of the company ABC wants to calculate the companys weighted average cost of capital. The relevant data pertaining to capital structure is as

The management of the company ABC wants to calculate the companys weighted average cost of capital. The relevant data pertaining to capital structure is as follows.

Rs. in million

18% preference shares (face value of Rs. 10 per share)	125
Equity share capital (face value of Rs. 10 per share)	385
Reserves	500
18% long-term loans	325
15% debentures	230
Total	1,565

The management of the company gathered following additional information.

Current ex-dividend preference shares price (Rupees)	12.5
Current ex-dividend equity shares price (Rupees)	28
Current ex-interest debenture market value (Rupees)	110
Equity beta of the company	0.8
Stock market risk premium	9.5%
Yield on long-term risk-free security	5.5%

The par value of the debentures is Rs. 100, which will be redeemed in 4 years and interest is paid on annual basis. The company uses a tax rate of 31%, ignoring flotation costs.

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