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
Related Book For
Introduction to Finance Markets Investments and Financial Management
ISBN: 978-1118492673
15th edition
Authors: Melicher Ronald, Norton Edgar
Posted Date:
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