International Finance

Beta=0.9 Market value of Debt Type of instrument Current Market Value (ЊЈ) Cost of Debt (kd) Bank Overdraft 169,800,000 6% Redeemable bond 310,200,000 3.52% Calculation of Cost of debt (kd)ЊжTable 2 Current Market Value (94) Coupon Payment Њж Dec-11 4 Dec-12 4 Dec-13 4 Dec-14 4 Dec-15 4 Redemption at premium 102 Њж Њж IRR (Pre tax) 4.88% IRR (Post tax) 3.52% Weighted Average Cost Of Capital Table 3 Instrument Market Value (ЊЈ) Rate of return Weightage(ЊЈ) Equity Shares 720,000,000 9.50% 68,400,000.00 Bank overdraft 169,800,000 6% 10,188,000.00 Redeemable bond 310,200,000 3.52% 10,905,381.42 ЊжTotal 1,200,000,000 89,493,381.42The weighted average cost of capital of the company is the weighted average of the various sources of finance used by the company. Debt is cheaper than equity