Weighted Average Cost of Capital

01) Debts Rs.8,00,000, Cost of Debt 7%

Preference Capital Rs. 2,00,000, Cost of Preference Capital 8 %

Equity Share Capital Rs.4,00,000, Cost of Equity Capital 12%

Retained Earnings Rs. 6,00,000 , Cost of Retained Earning 10%

Calculate Weighted Average Cost of Capital

(Weighted Cost of Capital = 9 %)

02) Debts Rs.6,00,000, Cost of Debt 6%

Preference Capital Rs. 1,80,000, Cost of Preference Capital 9%

Equity Share Capital Rs.1,20,000, Cost of Equity Capital 11%

Retained Earnings Rs. 3,00,000 , Cost of Retained Earning 10%

Calculate Weighted Average Cost of Capital

(Weighted Cost of Capital = 7.95 %)

03) Calculate Weighted Average Cost of Capital by using

(a) Book value as weights

(b) Market Value as weights

Type of Capital Book Value Rs. Market Value Rs. Specific Cost (%)
Debt 4,00,000 3,80,000 5%
Preference
1,00,000 1,10,000 8%
Shares
Equity Shares 6,00,000 9,00,000 15%
Retained
2,00,000 3,00,000 13%
Earnings
13,00,000 16,90,000

(Weighted Cost of Capital by using Book Values = 11.08 %)

(Weighted Cost of Capital by using Market Values = 11.94 %)

1
04) Calculate Weighted Average Cost of Capital by using

(a) Book value as weights

(b) Market Value as weights

Type of Capital Book Value Rs. Market Value Rs. Specific Cost (%)

Debt 9,00,000 9,00,000 8%

Preference
4,50,000 6,00,000 7%
Shares
Equity Shares 3,00,000 4,80,000 12%
Retained
1,50,000 4,20,000 10%
Earnings
18,00,000 24,00,000

(Weighted Cost of Capital by using Book Values = %)

(Weighted Cost of Capital by using Market Values = %)

05) Calculate Weighted Average Cost of Capital by using

(a) Book value as weights

(b) Market Value as weights

Type of Capital Book Value Rs. Market Value Rs. Specific Cost (%)
Debt 4,00,000 5,00,000 6%
Preference
2,00,000 3,00,000 8%
Shares
Equity Shares 7,00,000 8,00,000 12%
Retained
2,00,000 4,00,000 10%
Earnings
15,00,000 20,00,000

(Weighted Cost of Capital by using Book Values = %)

(Weighted Cost of Capital by using Market Values = %)

2
06) Calculate Weighted Average Cost of Capital by using

(a) Book value as weights

(b) Market Value as weights

Type of Capital Book Value Rs. Market Value Rs. After tax Cost (%)
Debt 30,000 30,000 5%
Preference
10,000 10,000 10%
Shares
Equity Shares 45,000 90,000 14%
Retained
15,000 13%
Earnings
1,00,000 24,00,000

(Weighted Cost of Capital by using Book Values = %)

(Weighted Cost of Capital by using Market Values = %)

07) Calculate Weighted Average Cost of Capital by using

(a) Book value as weights

(b) Market Value as weights

Type of Capital Book Value Rs. Market Value Rs. After tax Cost (%)
Debt 4,00,000 6,00,000 7%
Preference
2,00,000 3,00,000 8%
Shares
Equity Shares 5,50,000 12,00,000 12%
Retained
3,50,000 10%
Earnings
15,00,000 21,00,000

(Weighted Cost of Capital by using Book Values = %)

(Weighted Cost of Capital by using Market Values = %)