calculate weighted average cost of capital from the following using a)book value method b)market value method equity share capital rs 3,50,000with cost of equity @10%market value is rs 4,50,000 8% preference share of rs 4,00,000and it's market value is rs 4,50,000 6% debt of rs 6,00,000and it's market value is rs 5,60,000 retained earnings rs 1,50,000which has no chanel in the market value. it cost is equal to that of cost of equity.
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kd =1/ SV= rs 12/rs.80=15% and market value of debts is of 4,00, 000x.80 and it is = to Rs 3,20,000 .
Now you can calculate the Wacc is one of the 22, 00, 00/25, 20,000 x0.18 = 3, 20,000/25, 20,000x0.15= 1.176 and 17.6% is right answer so the student can follow and get updated ideas of it.
This formula is more comfortable for the student to move forward with presence of the right ideas of it.
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