Apoorva Ltd. has assets of ₹32,00,000 that have been financed as follows: Equity shares of ₹100 each ₹18,00,000 General reserve ₹3,60,000 Debt ₹10,40,000 For the year ended 31st March, 2014, the company's total profits b

Cost of debt (K d ) = 0.08 (1 - 0.40) = 0.048 or 4.8% Cost of equity (K e ) = (Earnings per share/market price per share) x 100 = [(₹6,23,000 - ₹83,200) (1-0.40)] / 18000 x 100 = 12% Calculation of WACC (based on market value) Source Amount (₹) Weight Specific cost of capital Weighted specific cost of capital Equity share capital 22,50,000 0.602 0.12 0.07224 Debt 10,40,000 0.278 0.048 0.01334 General reserves 4,50,000 0.120 0.12 0.0144 37,40,000 1.00 0.09998 Therefore, the Weighted average cost of capital is 0.09998 or 10% Note: Equity share capital and General reserves are divided in the ratio of 5:1 on the basis of their book value.