Do it on ASAP Basis , With Workings Q3. How do book value weights differ from market value weights in measurementof cost of capital?The following is the capital structure of PQR Ltd. :ParticularsAmount (Rs.)Equity Share Capital (Face Value Rs.10 per share)10% Preference Share Capital (Face Value Rs.100 per share)12% Debentures (Face Value Rs.100 per debenture)20,00,0004,00,00016,00,000Total40,00,000All these securities are traded in the capital market. Recent prices are: Debentures@ Rs.108 per debenture, Preference share @ Rs.125 per share, Equity shares @Rs.50 per share. The company expects to pay a dividend of Rs. 5 per share at theend of the year which is expected to grow at 8% p.a. The company pays incometax @ 35% . Calculate the company's cost pf capital using book value weights andmarket value weights.

The question is based on the concept of Financial Management.

Q3. How do book value weights differ from market value weights in measurement of cost of capital? The following is the capital structure of PQR Ltd. : Particulars Amount (Rs.) Equity Share Capital (Face Value Rs.10 per share) 20,00,000

Q3. How do book value weights differ from market value weights in measurement of cost of capital? The following is the capital structure of PQR Ltd. : Particulars Amount (Rs.) Equity Share Capital (Face Value Rs.10 per share) 20,00,000

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 1Q: Define each of the following terms: Weighted average cost of capital, WACC; after-tax cost of debt,...

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Question

Do it on ASAP Basis , With Workings

Q3. How do book value weights differ from market value weights in measurement
of cost of capital?
The following is the capital structure of PQR Ltd. :
Particulars
Amount (Rs.)
Equity Share Capital (Face Value Rs.10 per share)
10% Preference Share Capital (Face Value Rs.100 per share)
12% Debentures (Face Value Rs.100 per debenture)
20,00,000
4,00,000
16,00,000
Total
40,00,000
All these securities are traded in the capital market. Recent prices are: Debentures
@ Rs.108 per debenture, Preference share @ Rs.125 per share, Equity shares @
Rs.50 per share. The company expects to pay a dividend of Rs. 5 per share at the
end of the year which is expected to grow at 8% p.a. The company pays income
tax @ 35% . Calculate the company's cost pf capital using book value weights and
market value weights.

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