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Institute of Professional Education and Research (Technical Campus) Practice Book-Solutions

This document contains 10 solutions from the Practice Book of Module 3 from the Institute of Professional Education and Research's Technical Campus. Each solution is preceded by the name of the institute. The 10th solution calculates the weighted average cost of capital (WACC) of 11.72% for a company with a cost of equity of 20% and debt cost of 10%, debt of Rs. 1000, equity of Rs. 650, and a tax rate of 35%.

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34 views9 pages

Institute of Professional Education and Research (Technical Campus) Practice Book-Solutions

This document contains 10 solutions from the Practice Book of Module 3 from the Institute of Professional Education and Research's Technical Campus. Each solution is preceded by the name of the institute. The 10th solution calculates the weighted average cost of capital (WACC) of 11.72% for a company with a cost of equity of 20% and debt cost of 10%, debt of Rs. 1000, equity of Rs. 650, and a tax rate of 35%.

Uploaded by

mohini sen
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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INSTITUTE OF PROFESSIONAL EDUCATION AND RESEARCH

(TECHNICAL CAMPUS)

PRACTICE BOOK-SOLUTIONS
Module 3
Solution 1

INSTITU
TE OF PROFESSIONAL EDUCATION AND RESEARCH (TECHNICAL CAMPUS)
Solution 2
INSTITUTE OF PROFESSIONAL EDUCATION AND RESEARCH (TECHNICAL CAMPUS)
Solution 3
INSTITUTE OF PROFESSIONAL EDUCATION AND RESEARCH (TECHNICAL CAMPUS)
Solution 4
INSTI
TUTE OF PROFESSIONAL EDUCATION AND RESEARCH (TECHNICAL CAMPUS)
Solution 5

INSTI

TUTE OF PROFESSIONAL EDUCATION AND RESEARCH (TECHNICAL CAMPUS)

Solution 6
INSTITUTE OF PROFESSIONAL EDUCATION AND RESEARCH (TECHNICAL CAMPUS)
Solution 7
INSTITUTE OF
PROFESSIONAL EDUCATION AND RESEARCH (TECHNICAL CAMPUS)
Solution 8
INSTITUTE OF PROFESSIONAL EDUCATION AND RESEARCH (TECHNICAL CAMPUS)

INSTITUTE

OF PROFESSIONAL EDUCATION AND RESEARCH (TECHNICAL CAMPUS)

Solution 9
Therefore, value of equity, E = 1650-1000 = 650.00
Cost of equity, Ke is given by: Ke =Ko + (Ko - Kd)(1 - T) D/E
Ke = 0.15 + (0.15 - 0.1) (0.65)1000/650 = 20%
WACC = Ke x E/V + Kd (1 - T) x D/V= 11.72%

INSTITUTE OF PROFESSIONAL EDUCATION AND RESEARCH (TECHNICAL CAMPUS)


Solution 10
IN
STITUTE OF PROFESSIONAL EDUCATION AND RESEARCH (TECHNICAL CAMPUS)

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