Q.F Corporation needs additional capital of Rs. 1b. Firm decided to develop the following capital structure. (1 marks)

Security Market value required return

Debt Rs. 20,000,000 6.5%

Preferred stock Rs. 30,000,000 9%

Common stock Rs. 50,000,000 12.5%

Its corporate tax rate is 35 percent.

1. What is the firms weighted average cost of capital?
2. State the pecking order theory. How will your shuffle the above capital structure in order to follow the Pecking order theory.
3. Calculate the firms weighted average cost of capital, if the firms capital structure becomes as per pecking order theory.