Question
The common stock of Mobility Inc. is currently trading at Rs. 25 per share. The company has paid a dividend of Rs. 1.44 per share
The common stock of Mobility Inc. is currently trading at Rs. 25 per share. The company has paid a dividend of Rs. 1.44 per share in this year and is planning to distribute a dividend of 12% more than this year. The company expects a growth rate of 12%. The company also has some preference equity shares with the face value of Rs. 100 per share and 9.75% fixed dividend each year. Currently, each preference share is trading at Rs. 80. Further, the companys debt breakup is as follows:
Bank loan of 10 crore @ 13% interest
15 crore as debt from Mindisfresh Ltd. @ 6% interest rate
3 crore from an ex-partner in the company @ 10% interest rate
2 crore through bonds @ 5% interest rate
The breakup of the difference sources of capital is as follows:
Source | Proportion |
Ordinary equity | 40% |
Preference equity | 20% |
Debt | 30% |
Total | 100% |
Based on the information provided, what is the companys weighted average cost of capital? (15 marks)
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