The Present Capital Structure of a company is as follows:
Rs. (Million)
Equity Shares (Face Value = Rs.10) 240
Reserves 360
11% Pref. Shares (Face Value = Rs.10) 120
12% Debenture 120
14% Term Loan 360
Total 1200
Additional the following information is available:
Company's Equity beta = 1.06
Yield on long term treasury bonds = 10%
Stock market Risk Premium = 6%
Current ex-dividend equity share price = Rs.15
Current ex-dividend Pref. share price = Rs.12
Current ex-dividend debenture market value = Rs.102.50 per Rs.100
Corporate tax rate = 40%
The debenture are redeemable after 3 years and interest is paid annually.
Ignoring flotation costs, calculate the company's Weighted average cost of capital (WACC).
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