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The following facts describe Larsen & Toubro Ltd's component costs of capital and capitalstructure. Based on the information given, calculate Larsen & Toubro's WACC. Component
The following facts describe Larsen & Toubro Ltd's component costs of capital and capitalstructure. Based on the information given, calculate Larsen & Toubro's WACC.
Component Costs of Capital (%)
Cost of equity based on the CAPM: 15.6
Pretax cost of debt: 8.28
Tax rate: 30
Target weight in capital structure:
Equity 80, Debt 20
The prevailing risk-free rate is 6.1%. Calculate adjusted beta of L&T based on Blume's (1971) framework, if the market return is 10.2%.
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