● 2. From the following information in respect of a company for the year ended December 31, 2002, calculate weighted average Cost of Capital taking market values as weights.

[C.U. M.Com., 2003]

(i) Capital Structure `/lakh Equity (Shares of `100 each) 300 Retained Earnings 200 11% Convertible Debentures (`100 each) 200 12% Institutional Loan 300 1,000

(ii) Current market price is `200 per share. Corporate tax is 40%

(iii) Current dividend per share is `12. Tax on dividend is 10%. Future growth rate in dividend may be taken as a proxy of the average of the annual growth rates. The company’s past dividends per share were as follows:

Year Dividend per Share (`)

1997 6.50 1998 7.00 1999 8.00 2000 8.50 2001 10.00