Question
Following is the information about the capital structure of TEENESS Company: Shares O/S Book value Market value Cost of Component (%) Common stock 1,000,000 20,000,000
Following is the information about the capital structure of TEENESS Company:
Shares O/S | Book value | Market value | Cost of Component (%) | |
Common stock | 1,000,000 | 20,000,000 | 25,000,000 | - |
Preferred stock | 100,000 | 2,500,000 | 2,500,000 | 12.00 |
Bonds | - | 12,000,000 | 12,500,000 | 9.00 |
Loans | - | 8,000,000 | 8,000,000 | 11.00 |
Total capitalization | 45,500,000 | 48,000,000 | - |
Additional data available is as follows:
Tax rate 35%
Last years dividend per share Rs. 1.75
Growth-rate dividend 5.00%
Par value per share Rs. 20
Market value per share Rs. 25
Required:
By using the information provided above, find out the missing figures in the given table:
Cost of components (%) | Weightage of individual componentsBV | Weightage of individual componentsMV | WACC BV (%) | WACC MV (%) | |
Common stock | ? | 0.47 | 0.52 | ? | ? |
Preferred stock | 12.00 | 0.06 | ? | 0.72 | 0.60 |
Bonds | 9.00 | ? | 0.26 | ? | ? |
Loans | 11.00 | 1.19 | ? | 1.36 | 1.22 |
Overall WACC (Weighted Average Cost of Capital) | ? | ? |
(BV = Book Value; MV = Market Value)
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