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JO/He-Examinations, Oct 2020 (page 14 of 14j -Chromium quicforce.ibsindia.org/mod/quiz/attempt.php?attempt=178408&cmid=186095&page=13 on 38 Abacus Limited has the following book value capital structure: red Equity capital (25 million shares, Rs. 10 par) Rs.250 million d out of Preference capital, 10 percent (800,000 shares, Rs. 100 par) Rs. 80 million Retained earnings Rs. 50 million Debentures 14 percent (2,000,000 debentures, Rs 100 par) Rs.200 million Term loans, 14% Rs. 220 million Rs 800 million The next expected dividend per share is Rs 3.00. The dividend per share is expected to grow at the rate of 10 percent The market price per share is Rs 260. Preference stock, redeemable after 8 years, is currently selling for Rs. 90 per share. Debentures, redeemable after 5 years, are selling for Rs. 105 per debenture. Thetax rate for the company is 34 percent (a) Calculate the weighted average cost of capital using market value proportions (b) Define the marginal cost of capital schedule for the firm if it raises Rs 280 million next year, given the following information (i) the amount will be raised from equity and term loans in equal proportions () the firm expects to retain Rs 40 million earnings next year, the additional issue of equity stock will fetch a net price per share of Rs.250. (ly) the debt capital raised by way of term loans will cost 12 percent for the first Rs. 100 million and 13 percent for the next Rs 40 million (10+5=15 Marks) HCL 3 5 E T Y U