As a financial analyst of a large electrical company, you are required to determine the weighted average cost of capital using:

a. Book value weights

b. Market value weights

The following information is available for your perusal. The company's present book value capital structure is:

Debenture (Rs.100 per debenture) Rs.8,00,000

Preference shares (Rs.100 per share) Rs.2,00,000

Equity shares (Rs.10 per share) Rs.10,00,000

All these securities are traded in the capital markets. Recent Prices are:

Debentures, Rs.110 per debenture

Preference shares, Rs.120 per share

Equity shares, Rs.22 per share

Anticipated external financing opportunities are:

1. Rs. 100 per debenture redeemable at par; 10 year maturity, 11% coupon rate, 4% floatation costs, sales price, Rs.100.
2. Rs. 100 preference share redeemable at par; 10 year maturity, 12% dividend rate,5% floatation costs, sale price, Rs.100.
3. Equity shares: Rs.2 per share floatation costs, sale price = Rs.22 In addition, the dividend expected on the equity share at the end of the year is Rs.2 per share; the anticipated growth rate in dividends is 7% and the firm has the practice of paying all its earnings in the form of dividends. The corporate tax rate is 35%.