Uber Ltd. has the following book value capital structure: Sources Millions (Rs.) Equity Capital (10 million shares, Rs.10 par) 100 Preference Capital, 11% (100000 shares Rs.100) 10 Retained earnings 120 Debentures, 13.5% (500000 debentures Rs.100) 50 Term loans 12% 80 360 1. The next expected dividend per share is Rs.1.50. 2. The dividend per share is expected to grow at the rate of 7%. 3. The market price per share is Rs.20. 4. Preference stock, redeemable after 10 years, is currently selling for Rs.75 per share. 5. Debentures, redeemable after 6 years are selling for Rs.80 per debenture. 6. The tax rate for the company is 50%. Calculate the weighted average cost of capital using: 1. Book value proportions and 2. Market value proportions.
Uber Ltd. has the following book value capital structure: Sources Millions (Rs.) Equity Capital (10 million shares, Rs.10 par) 100 Preference Capital, 11% (100000 shares Rs.100) 10 Retained earnings 120 Debentures, 13.5% (500000 debentures Rs.100) 50 Term loans 12% 80 360 1. The next expected dividend per share is Rs.1.50. 2. The dividend per share is expected to grow at the rate of 7%. 3. The market price per share is Rs.20. 4. Preference stock, redeemable after 10 years, is currently selling for Rs.75 per share. 5. Debentures, redeemable after 6 years are selling for Rs.80 per debenture. 6. The tax rate for the company is 50%. Calculate the weighted average cost of capital using: 1. Book value proportions and 2. Market value proportions.
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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Jm. 163.
Transcribed Image Text:Uber Ltd. has the following book value capital structure:
Sources
Millions (Rs.)
Equity Capital (10 million shares, Rs.10 par)
100
Preference Capital, 11% (100000 shares Rs.100)
10
Retained earnings
120
Debentures, 13.5% (500000 debentures Rs.100) 50
Term loans 12%
80
360
1. The next expected dividend per share is Rs.1.50.
2. The dividend per share is expected to grow at the rate of 7%.
3. The market price per share is Rs.20.
4. Preference stock, redeemable after 10 years, is currently selling for Rs.75 per share.
5. Debentures, redeemable after 6 years are selling for Rs.80 per debenture.
6. The tax rate for the company is 50%.
Calculate the weighted average cost of capital using:
1. Book value proportions and
2. Market value proportions.
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