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 .

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.