A public limited company was recently formed to manufacture a new product. It has the following capital structure in the market value terms:
DebenturesRs. 7,000,000
Preferred stock 1,000,000
Common stock (320,000 shares) 8,000,000
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Total capital Rs.16,000,000
The company has a marginal tax rate of 40%. A study of publicly held companies in this line of business suggests that the required return on equity is about 17%. The company’s debt is currently yielding 13%, and its preferred stock is yielding 15%.
Compute the firm’s present weighted average cost of capital.
2006-11-13
05:45:03
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1 answers
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asked by
Mani
1
in
Investing