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Consider a firm xyz having the following capital structure: Debt: Rs. 200,000 Preferred Stock: Rs. 800,000 Common Stock: Rs. 500,000 The price per share of

Consider a firm xyz having the following capital structure:

Debt: Rs. 200,000

Preferred Stock: Rs. 800,000

Common Stock: Rs. 500,000

The price per share of preferred stock is Rs. 113 and the dividend per share of preferred stock is Rs. 4. The firm has issued an 8% 100,000 par value bond. The bonds are being traded at a premium of 5% and 4 years are remaining till maturity. The price per share of common stock is Rs. 81 and the dividend per share of common stock is Rs. 3. This dividend is expected to grow at a rate of 6% for the first 2 years, then at a rate of 5% for the next 3 years, afterward it will constantly grow at a rate of 4% forever. Calculate the WACC. The tax rate is 35%.

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