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Debentures Preferred stock R. 60,00,000 R 20,00,000 Common stock (3,20,000 shares) R. 80,00,000 Rs. 1,00,00,000 The company has a marginal tax rate of 40 percent and the required return on equity is about 17 percent. The Company's debt is currently yielding 13 percent, and its preferred stock is yielding 12 percent. Compute the firm's present weighted average cost of capital.?
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Debentures Preferred stock R. 60,00,000 R 20,00,000 Common stock (3,20...
Weighted Average Cost of Capital (WACC) Calculation
- Debt: Rs. 60,00,000
- Preferred stock: Rs. 20,00,000
- Common stock: Rs. 1,00,00,000

Cost of Debt: 13%

Cost of Preferred Stock: 12%

Cost of Equity: 17%

Tax Rate: 40%

Step 1: Calculate the Cost of Debt (Kd)
Kd = 13% * (1 - 0.40) = 7.8%

Step 2: Calculate the Cost of Preferred Stock (Kp)
Kp = 12%

Step 3: Calculate the Cost of Equity (Ke)
Ke = 17%

Step 4: Calculate the Weighted Average Cost of Capital (WACC)
WACC = (D/V * Kd) + (P/V * Kp) + (E/V * Ke)
Where:
D = Market value of debt
P = Market value of preferred stock
E = Market value of equity
V = Total value of the firm (D + P + E)
WACC = (60,00,000 / 1,80,00,000 * 7.8%) + (20,00,000 / 1,80,00,000 * 12%) + (1,00,00,000 / 1,80,00,000 * 17%)
WACC = (0.3333 * 7.8%) + (0.1111 * 12%) + (0.5556 * 17%)
WACC = 2.60% + 1.33% + 9.44%
WACC = 13.37%
Therefore, the firm's present weighted average cost of capital (WACC) is 13.37%.
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Debentures Preferred stock R. 60,00,000 R 20,00,000 Common stock (3,20,000 shares) R. 80,00,000 Rs. 1,00,00,000 The company has a marginal tax rate of 40 percent and the required return on equity is about 17 percent. The Company's debt is currently yielding 13 percent, and its preferred stock is yielding 12 percent. Compute the firm's present weighted average cost of capital.?
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Debentures Preferred stock R. 60,00,000 R 20,00,000 Common stock (3,20,000 shares) R. 80,00,000 Rs. 1,00,00,000 The company has a marginal tax rate of 40 percent and the required return on equity is about 17 percent. The Company's debt is currently yielding 13 percent, and its preferred stock is yielding 12 percent. Compute the firm's present weighted average cost of capital.? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about Debentures Preferred stock R. 60,00,000 R 20,00,000 Common stock (3,20,000 shares) R. 80,00,000 Rs. 1,00,00,000 The company has a marginal tax rate of 40 percent and the required return on equity is about 17 percent. The Company's debt is currently yielding 13 percent, and its preferred stock is yielding 12 percent. Compute the firm's present weighted average cost of capital.? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Debentures Preferred stock R. 60,00,000 R 20,00,000 Common stock (3,20,000 shares) R. 80,00,000 Rs. 1,00,00,000 The company has a marginal tax rate of 40 percent and the required return on equity is about 17 percent. The Company's debt is currently yielding 13 percent, and its preferred stock is yielding 12 percent. Compute the firm's present weighted average cost of capital.?.
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