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    Solution of CF

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    Muhammad Taimur
    This document contains calculations to determine a company's weighted average cost of capital (WACC). It provides the cost of various sources of capital such as debt, preferred stock, retained earnings, and equity. It also calculates an original and revised WACC. The revised WACC is 13.051%, an increase from the original WACC of 12.88%.

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    Solution of CF

    Uploaded by

    Muhammad Taimur
    44 views4 pages
    This document contains calculations to determine a company's weighted average cost of capital (WACC). It provides the cost of various sources of capital such as debt, preferred stock, retained earnings, and equity. It also calculates an original and revised WACC. The revised WACC is 13.051%, an increase from the original WACC of 12.88%.

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    CF solution

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    This document contains calculations to determine a company's weighted average cost of capital (WACC). It provides the cost of various sources of capital such as debt, preferred stock, retained earnings, and equity. It also calculates an original and revised WACC. The revised WACC is 13.051%, an increase from the original WACC of 12.88%.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    44 views4 pages

    Solution of CF

    Uploaded by

    Muhammad Taimur
    This document contains calculations to determine a company's weighted average cost of capital (WACC). It provides the cost of various sources of capital such as debt, preferred stock, retained earnings, and equity. It also calculates an original and revised WACC. The revised WACC is 13.051%, an increase from the original WACC of 12.88%.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    You are on page 1of 4

    Tax 40%

    Amount Weight Rr After-tax Cost Weighted cost


    Debentures 180000 0.3 8% 0.048 0.01
    Retained Earnings 200000 0.33 17.87% 18% 0.06
    Equity 160000 0.27 18.52% 18.52% 0.05
    P.Shares 60000 0.1 10% 10% 0.01
    600000
    WMCC 0.13

    600000

    Revised WACC
    Amounts Weights Cost After tax cost Weighted costs
    Cost of Debt (Kd)
    Existing 300000 0.1875 7% 4.20% 0.007875
    New 180000 0.1125 8% 4.80% 0.0054

    Cost of Preferred stock(Kp)


    Existing 100000 0.0625 9% 9.00% 0.005625
    New 60000 0.0375 10% 10.00% 0.00375

    Cost of Equity (Ke)


    Existing 600000 0.375 17.87% 17.87% 0.06700741525
    New 160000 0.1 18.52% 18.52% 0.01852071563

    Cost of Retained earning (Kr)


    New 200000 0.125 17.87% 17.87% 0.02233580508

    Total 1600000
    WACC Revised 13.051%
    Amount Weight Rr After-tax Cost
    Debentures 300000 30% 7% 4.200%
    Preferred Stock 100000 10% 9% 9%
    Equity 600000 60% 17.87% 17.87%
    1000000 WACC

    Tax 40%
    Cost of Debenture

    Interest 21000 9
    FV 1000

    Cost of Preferred stock

    Cost of Equity

    Old New
    1 1
    1.12 0.12 1.12 0.12
    1.25 0.12 1.25 0.12
    1.4 0.12 1.4 0.12
    1.57 0.12 1.57 0.12
    1.76 0.12 1.76 0.12
    1.97 0.12 1.97 0.12
    2.21 0.12 2.21 0.12
    2.47 0.12 2.47 0.12
    2.77 0.12 2.77 0.12

    D1 1.39 D1 1.39
    g 12% g 12%
    Po 23.6 Np 21.24
    Re 0.178686 Re 0.18520715631

    New Preffered Stock

    NP 20
    Dp 2

    Rp 10%
    Weighted cost
    0.0126
    0.009
    0.1072119
    12.88%

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