Question: Uber Ltd. has the following book value capital structure: Sources Millions (Rs.) Equity Capital (10 million shares, Rs.10 par) 100 Preference Capital, 11% (100000 shares

Uber Ltd. has the following book value capital structure:

Sources Millions (Rs.)
Equity Capital (10 million shares, Rs.10 par) 100
Preference Capital, 11% (100000 shares Rs.100) 10
Retained earnings 120
Debentures, 13.5% (500000 debentures Rs.100) 50
Term loans 12% 80
360

  1. The next expected dividend per share is Rs.1.50.
  2. The dividend per share is expected to grow at the rate of 7%.
  3. The market price per share is Rs.20.
  4. Preference stock, redeemable after 10 years, is currently selling for Rs.75 per share.
  5. Debentures, redeemable after 6 years are selling for Rs.80 per debenture.
  6. The tax rate for the company is 50%.

Calculate the weighted average cost of capital using:

  1. Book value proportions and
  2. Market value proportions.

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