AID18842 The following is the capital structure of Alpha Limited as on 31st March 2020

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The following is the capital structure of Alpha Limited as on 31st March 2020
Equity Shares: 10000 shares (of Rs 100 each) Rs 10,00,000
12% Preference Shares (of Rs 100 each) Rs 10,00,000
10% Debentures Rs 12,00,000
The market price of the company’s share is Rs 120 and it is expected that a dividend of Rs 10 per share would be declared by the company. The dividend growth rate is 5%. If the tax rate is 30%, calculate Weighted Average Cost of Capital (WACC) by book value & market value method. Assume market value of Preference shares and Debentures to be same as the book value. Comment on the results.
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