Z Ltd. provides you the following information: Equity Share Capital ₹200 lakh; 8% Secured Loan ₹40 lakh; 10% Unsecured Loan ₹60 lakh; Total Capital Employed ₹300 lakh; Profit After Tax ₹31,66,000; Rate of Tax 40%; Cost o

Calculation of Cost of Various Funds: (i) Cost of Secured Loan = (Interest x (1 - tax Rate) / Loan Amount) x 100 = (3,20,000 x (1 - 0.40) / 40,00,000) x 100 = 4.8% (ii) Cost of Unsecured Loan = (Interest x (1 - tax Rate) / Loan Amount) x 100 = (6,00,000 x (1 - 0.40) / 60,00,000) x 100 = 6% (iii) Cost of Equity = 12% Calculation of Weighted Average Cost of Capital (WACC) Funds Amount (₹) lakh Cost After tax Weight Weighted Cost Equity Share Capital 200 12% 0.667 8.0% Secured Loan 40 4.8% 0.133 0.64% Unsecured Loan 60 6% 0.200 1.20% Total 300 9.84% Cost of Capital (₹) = WACC * Capital Employed = 9.84% * 300 lakh = ₹29.52 lakh Economic Value Added (₹) = Net Profit after tax - Cost of Capital = ₹31,66,000 - ₹29,52,000 = ₹2,14,000