● 3. From the following information in respect of a company for the year ended December 31, 2003, calculate weighted average Cost of Capital taking market values as weights.

(i) Capital Structure `/lakh Equity (Shares of `100 each) 200 Reserves and Surplus 100 10% Bonds (`1,000 each) 200 500

(ii) Current market prices: Equity, `300 per share; Bond, `1,010 per unit

(iii) Corporate tax is 40%

(iv) Current dividend per share is `20. 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 follows:

Year Dividend per Share (`)

1998 12.50 1999 13.00 2000 14.00 2001 15.50 2002 17.50