Compute the weighted average cost of capital, Financial Management

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Q. Compute the weighted average cost of capital?

A company's subsequent to tax specific cost of capital are as follows:

Cost of debt                                                                10%

Cost of Preference Shares                                           12%

Cost of Equity Shares                                                   15%

The subsequent is the capital structure:

Source                                                                         Amount

Debt                                                                            3,00,000

Preference Share Capital                                             2,00,000

Equity Share Capital                                                   5,00,000

____________

 10,00,000

____________

Compute the weighted average cost of capital, Kw

Calculation of Weighted Average Cost of Capital using Book Value Weights:-

2373_Compute the weighted average cost of capital.png

The weighted average cost utilizing book value weights is 12.9%


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