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Calculate weighted average cost of capital on market value

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Reference no: EM132494021

The capital structure of XYZ Ltd.in book value term is as follows:-

Equity share(30 million share,Rs 10 par)- 300 million

Preference capital,12%(600,000share,Rs100 par)-50 million

Debentures 14%(1,300,000 debenture,Rs100 par)-130 million

Term loan,14%- 90 million

Total- Rs 580 million

Question 1: The next expected dividend per share is Rs 3.00. The dividend per share is expected to grow at the rate of 13%. The market price per share is Rs 60.00.Preference stock,redeemable after 10 years,is currently selling for Rs 90 per share. Debentures,redeemable after 5 years,are selling for Rs 100 per debenture. The tax rate for the company is 40%. Calculate the weighted average cost of capital based on market value.

Reference no: EM132494021

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