Financial Management

[SRINIVASARAO PEDDI]

Calculate Weighted average cost of capital from the following using a) book value method b) Market Value method

1) Equity Share capital Rs. ₹ 3,50,000/- with cost of Equity @ 10% market value is ₹ 4,50,000/-

2) 8% Preference shares of ₹ 4,00,000/- and its market value is Rs. ₹ 4,50,000/-

3) 6% Debt of ₹ 6,00,000/- and its market value is ₹ 5,60,000/-

4) Retained earnings ₹ 1,50,000/- which has no change in the market value . It cost is equal to that of cost of Equity. Can you please send the Reply .

[Ganeshan Kalyani]

What is your query out of this. You are requesting us to work out the reply. This can be done by referring to management accounting formula available in the books.

Pls try yourself and share with us, we shall validate it . Thanks.

[SRINIVASARAO PEDDI]

Yes We want reply for this

[DR.MARIAPPAN GOVINDARAJAN]

This is the forum for discussion of legal issues but not for calculation like that.

[Ganeshan Kalyani]

You are well educated sir. I am sure you would have done it.

If any issue please elaborate it, we will put our all efforts to clarify the same.

[SRINIVASARAO PEDDI]

Dear Sir,

We have done it but 4th point of the problem can you please clarify the 4th point

AI Summary

Weighted Average Cost of Capital calculation query: determine WACC under book value and market value methods with retained earnings treatment. Calculation of Weighted Average Cost of Capital under book value and market value methods using four components: equity with stated cost and market value, 8% preference shares with book and market values, 6% debt with book and market values, and retained earnings whose market value is unchanged and whose cost equals the cost of equity; retained earnings are to be treated as an equity cost element for weighting.