a. Component cost of debt is:
"0.1\u00d7(1 - 0.25) = 0.075" or 7.5%.
Cost of preference shares is:
"12\/100 = 0.12" or 12%.
and cost of equity shares is:
"Ke = 0.06 + 1.5\u00d7(0.15 - 0.06) = 0.195" or 11.25%.
b. "WACC = 0.195\u00d70.6 + 0.075\u00d70.25 + 0.12\u00d70.15 = 0.1538."
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