6. The Capital Structure and specific Cost of Capital (after tax) of a company are given as...

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6. The Capital Structure and specific Cost of Capital (after tax) of a company are given as follows:

Book Value `(in Lakh) After-tax Cost (%)

Equity Share Capital (Share of `10 each) 200 18 Retained Earnings 100 18 Long-Term Debt 200 6 500 The present market value of equity is `90 per share. Corporate tax rate is 40%.

(i) Calculate weighted average Cost of Capital using:

(a) book value as weights

(b) market value as weights

(ii) Explain the difference in weighted average costs as above.

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Financial Management

ISBN: 9789352605606

1st Edition

Authors: Swapan Sarkar, Bappaditya Biswas, Samyabrata Das, Ashish Kumar Sana

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Question Posted: Jul 23, 2024 07:01 AM

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6. The Capital Structure and specific Cost of Capital (after tax) of a company are given as...

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Financial Management

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