Q3. How do book value weights differ from market value weights in measurement of cost of capital? The following is the capital structure of PQR Ltd. : Particulars Amount (Rs.) Equity Share Capital...

Do it on ASAP Basis , With Workings

Extracted text: Q3. How do book value weights differ from market value weights in measurement of cost of capital? The following is the capital structure of PQR Ltd. : Particulars Amount (Rs.) Equity Share Capital (Face Value Rs.10 per share) 10% Preference Share Capital (Face Value Rs.100 per share) 12% Debentures (Face Value Rs.100 per debenture) 20,00,000 4,00,000 16,00,000 Total 40,00,000 All these securities are traded in the capital market. Recent prices are: Debentures @ Rs.108 per debenture, Preference share @ Rs.125 per share, Equity shares @ Rs.50 per share. The company expects to pay a dividend of Rs. 5 per share at the end of the year which is expected to grow at 8% p.a. The company pays income tax @ 35% . Calculate the company's cost pf capital using book value weights and market value weights.