SUMMARIZED BALANCE SHEET OF GRAND ELECTRIC LIMITED All figures in thousands of rupees 2011 2012 Cash 21,840 24,450 Trade receivables 214,550 221,630 Inventories 211,410 225,820 Total current assets 447,800 471,900 Fixed assets, net of depreciation 388,400 416,300 Total assets 836,200 888,200 Bank overdraft 6,210 8,110 Trade payables 257,640 288,200 Accrued taxes 6,450 7,190 Total current liabilities 270,300 303,500 Long term debt 150,000 150,000 11% preferred share capital 100,000 100,000 Ordinary share capital (Rs. 10 per share) 200,000 200,000 Retained Earnings 115,900 134,700 Total Long term Debt and Equity 565,900 584,700 Total Equities and Liabilities 836,200 888,200 Market value of Oridinary shares: Rs Per share 21.80 22.50 Earnings per share: Rs 3.00 3.15 Dividend per share: Rs 1.50 1.50 Notes: i. Current portion of long term debt is included in Ltd. ii. The company has two long term loans. The first loan of Rs. 50m is due for the retirement at the end of 2013. It carries an interest rate of 12% and also incurs incidental costs (e.g. trustees fees, registrar fee, etc.) of 0.50% per annum. The second loan of Rs 100m carries a floating rate of 2% above 6 months KIBOR. The average KIBOR for 2011 and 2012 were 9.1% and 9.4% respectively. This loan will mature in 2020 and attracts no changes other than interest. Both loans require bullet repayment of principal at the end of the loan tenure. iii. Effective corporation tax rate for the company is 35% Required: As a first exercise, Naheed was asked by Lateef Qureshi to study the information mentioned above with particular objective: To assess its present Weighted Average Cost of Capital (WACC). Show the working of Naheed.