Q.2 The following is the capital Structure of Maruti Itd. Sources of capital Book value Market value Rs. Rs. Equity shares of Rs. 100 each | 9% Cumulative preference shares of Rs. 100 each 11 % Debentures Retained Earnings 80,00,000 40,00,000 10,00,000 30,00,000 20,00,000| 1,00,00,000 12,00,000 33,00,000 ТОTAL 1,25,00,000 Additional Information: 1. For the last year the company had paid equity dividend at 25% and its dividend is likely to grow 5% every year. 2. The current market price of the company's equity share is Rs. 200. 3. Corporate tax rate is 30% and shareholders personal income tax rate is 20% You are required to calculate: a) Cost of capital for each source of capital. b) Weighted average cost of capital on the basis of book value weights. c) Weighted average cost of capital on the basis of market value weights.
Q.2 The following is the capital Structure of Maruti Itd. Sources of capital Book value Market value Rs. Rs. Equity shares of Rs. 100 each | 9% Cumulative preference shares of Rs. 100 each 11 % Debentures Retained Earnings 80,00,000 40,00,000 10,00,000 30,00,000 20,00,000| 1,00,00,000 12,00,000 33,00,000 ТОTAL 1,25,00,000 Additional Information: 1. For the last year the company had paid equity dividend at 25% and its dividend is likely to grow 5% every year. 2. The current market price of the company's equity share is Rs. 200. 3. Corporate tax rate is 30% and shareholders personal income tax rate is 20% You are required to calculate: a) Cost of capital for each source of capital. b) Weighted average cost of capital on the basis of book value weights. c) Weighted average cost of capital on the basis of market value weights.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Q.2 The following is the capital Structure of Maruti Itd.
Sources of capital
Book value
Market value
Rs.
40,00,000
10,00,000
30,00,000
20,00,000
Rs.
80,00,000
Equity shares of Rs. 100 each
9% Cumulative preference shares of Rs. 100 each
11 % Debentures
Retained Earnings
12,00,000
33,00,000
ТОTAL
1,00,00,000
1,25,00,000
Additional Information:
1. For the last year the company had paid equity dividend at 25% and its dividend is likely
to grow 5% every year.
2. The current market price of the company's equity share is Rs. 200.
3. Corporate tax rate is 30% and shareholders personal income tax rate is 20%
You are required to calculate:
a) Cost of capital for each source of capital.
b) Weighted average cost of capital on the basis of book value weights.
c) Weighted average cost of capital on the basis of market value weights.
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