Reference no: EM133075808
ABC Ltd has the following capital structure as per its latest balance sheet Description Amt Rs
Equity Share Capital (Fully paid shares of Rs 10 each) 4,00,000
18% Preference Share Capital (Fully paid shares of Rs 3,00,000 100 each ) 300000
Reserves and Surplus 1,00,000
12.5 % Debentures (Fully paid of Rs 100 each ) 8,00,000
12% Term Loan 4,00,000
Total 2000000
Additional Information:
a) The current market price of the company's equity share is Rs 64 25 The prevailing defaultrisk free interest rate on 10 year GOI Treasury Bonds is 55 percent. The average market risk premium is 8 percent and the beta of the company is 1.1875
b) The preference shares of the company are redeemable after 10 years, and are currently trading at Rs 90 per share.
c) The debentures of the company which are redeemable after 5 years are currently traded at Rs 95 per debenture
d.)The corporate tax rate is 30 percent Calculate weighted average cost of capital using (A) Book Value Weightsand (b) Market Value weights
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