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XYZ Ltd. has the following capital structure: Source Description Amount Equity share capital 100 lac shares of face value Rs lacs 1000 Rs 10 each
XYZ Ltd. has the following capital structure: Source Description Amount Equity share capital 100 lac shares of face value Rs lacs 1000 Rs 10 each Reserves and surplus Rs 1600 lacs Debentures Rs 2000 lacs 2000 debentures of face value Rs 1 lac each Fixed deposits Rs 500 lacs The company pays 9.5% interest on debentures and 10% interest on fixed deposits. The beta of the company is 1.23, yield on Gol bonds is 5.5% and market risk premium is 6.5%. The current market price of equity shares is Rs 120, and of debentures is Rs 1.02 lacs. The debentures are redeemable at par after 5 years. FDs are redeemable after 3 years. The tax rate is 30%. Calculate weighted average cost of capital using (a) Book Value Weights, and (b) Market Value weights (15 marks)
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