● ABC Ltd. has the following book value Capital Structure:

Equity Capital (in share of `10 each, fully paid up at par) `30 Crores 10% Preference Capital (in shares of `100 each, fully paid up at par) `2 Crores Retained Earnings `40 Crores 14% Debentures (of `100 each) `20 Crores 15% Term Loans `25 Crores The next expected divide on equity shares per share is `3.60; the dividend per share is expected to grow at the rate of 5%. The market price per share is `30.

Preference share are redeemable after 10 years and current market price is `80 per preference share.

Debentures, redeemable after 6 years, are selling at `90 per debenture.

The income tax rate for the company is 30%

(i) Required to calculate the current weighted average Cost of Capital using

(a) Book value proportions and

(b) Market value proportions

(ii) Determine the weighted marginal Cost of Capital schedule for the company, if it raises `20 crores next year, given the following information.

(a) The amount will be raised by equity and debt in equal proportions

(b) The company expects to retain `3 crores earning next year

(c) The additional issue of equity shares will result in the net price per share being fixed at

`25

(d) The Debt Capital raised by way of term loans will cost 15% for the first `5 crores and 16%

for the next 5 crores.