A firm finances itself with 20% debt and 80% equity. Debt costs 10% and equity costs 15%. Ignoring taxes, what is its weighted average cost of capital?
14%
Ignoring taxes, \(\operatorname{WACC}=0.20(10\%)+0.80(15\%)=14\%\).
Important Questions from Cost of Capital
A company has 10% perpetual debt of Rs. 1,00,000. The tax rate is 35%. Which one of the following is the after-tax cost of capital assuming that the debt is issued at 10% premium?
Company's current price of share is Rs. 60 and dividend per share is Rs. 4 . If its capitalisation rate is 12 percents. What is dividend growth rate?
X Ltd. forfeited 40 shares of Rs. 10 each and on which Rs. 4 per share were paid. If the forfeited shares reissued as Rs. 8 per share paid up, what is the minimum price the company must charge?
Which of the sources of finance has an implicit cost of capital?
Cost of Equity Share Capital is more than cost of Debt because :
