Question 18.13: Given below is the information related to the capital struct......

Management Accounting and Financial Analysis for CA Final Examination [995093]

Given below is the information related to the capital structure of a US based Indian subsidiary.
Determine the weighted average cost of capital (based on book value weights).

$Specific\>cost$	$Amount$
15.0%	Rs 900 million	Equity share capital
12.5	100	12% Preference share capital
7.5	400	11% Debentures
13.0	600	Retained earnings

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$K_o$ = (Rs 255.5 million/Rs 2,000 million) × 100 = 12.775 per cent.

Computation of Weighted Average Cost of Capital

$Total\> cost$	$Specific\>cost$	$Amount$	$Source\> of\> capital$
Rs 135.0 million	0.15	Rs 900 million	Equity
12.5	0.125	100	12% Preference share capital
30.0	0.075	400	11% Debentures
78.0	0.13	600	Retained earnings
255.5		2,000

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