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1. Book value proportions and Market value proportions

1. Book value proportions and Market value proportions

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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JJ. 165.

Surya Ltd. has the following book value capital structure: Million (Rs.) Equity Capital (10 million shares, Rs.10 par) Preference Capital, 11% (100000 shares Rs.100) Retained earnings Debentures, 13.5% (500000 debentures Rs.100) 50 Term loans 12% 80 100 10 120 360 The next expected dividend per share is Rs.1.50. The dividend per share is expected to grow at the rate of 7%. The market price per share is Rs.20. Preference stock, redeemable after 10 years is currently selling for Rs.75 per share. Debentures, redeemable after 6 years are selling for Rs.80 per debenture. The tax rate for the company is 50%. Calculate the weighted average cost of capital using: 1. Book value proportions and Market value proportions
Transcribed Image Text:Surya Ltd. has the following book value capital structure: Million (Rs.) Equity Capital (10 million shares, Rs.10 par) Preference Capital, 11% (100000 shares Rs.100) Retained earnings Debentures, 13.5% (500000 debentures Rs.100) 50 Term loans 12% 80 100 10 120 360 The next expected dividend per share is Rs.1.50. The dividend per share is expected to grow at the rate of 7%. The market price per share is Rs.20. Preference stock, redeemable after 10 years is currently selling for Rs.75 per share. Debentures, redeemable after 6 years are selling for Rs.80 per debenture. The tax rate for the company is 50%. Calculate the weighted average cost of capital using: 1. Book value proportions and Market value proportions
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