Calculate the Weighted Average Cost of Capital of Makkhu Ltd. from the following information: Particulars Amount in ₹ 4,00,000 Equity Shares of ₹10 each fully paid-up 40,00,000 80,000, 9% Preference Shares of ₹10 each fu

Calculation of Weighted Average Cost of Capital (WACC) 1. Cost of Equity (K e ): K e = (Earnings per Share / Market Price per Share) * 100 K e = (₹ 9 / ₹ 45) * 100 = 20% 2. Cost of Preference Shares (K p ): K p = Preference Dividend Rate = 9% 3. Cost of Retained Earnings (K r ): Given that Cost of Equity can be considered as Cost of Retained Earnings. K r = K e = 20% 4. Cost of Debt (K d ): K d = Interest Rate * (1 - Tax Rate) K d = 8% * (1 - 0.30) = 8% * 0.70 = 5.6% 5. Calculation of WACC: Source of Funds Amount (Rs.) Weight Cost of capital WACC Equity shares 40,00,000 0.4 0.20 0.08 Preference shares 8,00,000 0.08 0.09 0.0072 Retained earnings 32,00,000 0.32 0.20 0.064 Debentures 20,00,000 0.20 0.056 0.0112 Total 1,00,00,000 0.1624 or 16.24%