Q2 a. The capital structure of Z Ltd. is given below: Particulars Amount (in Rs.) Equity share Capital ( shares of Rs. 10 each) 1000000 12% Preference share capital (Share of Rs.100 each) 200000 10% term loan 500000 11% debentures of Rs.100 each) 800000 Retained Earnings 800000 The expected dividend is Rs. 2.2 per equity share and its is expected to grow at 7%. Equity shares are trading at Rs.22. Preference shares are trading at Rs.95 and are redeemable after 10 years. Debentures are selling at 96% and are redeemable after 10 years. Tax rate is 35%. Calculate the WACC using book value and market value weights.

Q2 a. The capital structure of Z Ltd. is given below: Particulars Amount (in Rs.) Equity share Capital ( shares of Rs. 10 each) 1000000 12% Preference share capital (Share of Rs.100 each) 200000 10% term loan 500000 11% debentures of Rs.100 each) 800000 Retained Earnings 800000 The expected dividend is Rs. 2.2 per equity share and its is expected to grow at 7%. Equity shares are trading at Rs.22. Preference shares are trading at Rs.95 and are redeemable after 10 years. Debentures are selling at 96% and are redeemable after 10 years. Tax rate is 35%. Calculate the WACC using book value and market value weights.

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

Problem 1PS

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Question

Q2 a. The capital structure of Z Ltd. is given below:
Particulars
Amount (in Rs.)
Equity share Capital ( shares of Rs. 10 each)
1000000
12% Preference share capital (Share of Rs.100 each) 200000
10% term loan
500000
11% debentures of Rs.100 each)
800000
Retained Earnings
800000
The expected dividend is Rs. 2.2 per equity share and its is expected to grow at 7%. Equity
shares are trading at Rs.22. Preference shares are trading at Rs.95 and are redeemable after 10
years. Debentures are selling at 96% and are redeemable after 10 years. Tax rate is 35%.
Calculate the WACC using book value and market value weights.
(16)

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