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GTG Ltd. has the following book value capital structure. Existing Book Value Capital Structure Book Value (in million) Equity Capital (50 million shares, Rs 10

GTG Ltd. has the following book value capital structure.

Existing Book Value Capital Structure

Book Value (in million)

Equity Capital (50 million shares, Rs 10 par)

500

Preference Capital, 9% ( 1 million preference shares, Rs 100 par)

100

Retained Earnings

100

Debentures, 11% ( 2 million debentures, Rs 100 par)

200

Term Loans, 10%

150

Total

1050

Additional information available: (a) Equity Capital: Next expected dividend is Rs 2 per share and dividend per share is expected to grow at rate of 7%. Current market price of share is Rs 40. (b) Preference Capital: Preference shares would be maturing at par after 5 years. Current market price of preference share is Rs 95. (c) Debentures: Debentures would be maturing at par after 4 years. Current market price of debenture is Rs 102. (d) Tax rate for the company is 30%. You are required to calculate the following: (1) Cost of all sources of capital relevant for the calculation of overall cost of capital of the company. (2) Weighted Average Cost of Capital (WACC) as per book value and market value proportions.

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