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Cost of capital

Financial Management

For calculating cost of equity and retained earnings why is ₹130 not used and ₹125 being used?

Satha Sivam

CA Inter

★ 6K+

23-Feb-24 16:18

137

Answers (2)

I think Those are earnings of the company If they are earnings of the company then there is no concept of flotation cost hence it will be removed from market price

Mr M

CA Inter

★ 2K+

23-Feb-24 17:34

Ideally for irredeemable securities like Equity Shares/Irredeemable Preference Shares/Irredeemable Debentures MV is more preferred, in case the question is specifically about WACC based on MV But when the question is a combination of computation of BV & MV, to avoid the confusion of using different costs, as weights any ways have to be inevitably different for BV & MV, & also to differentiate between Ke & Kr, Ke is considered based on (issue price - floatation cost) & Kre is considered on issue price ignoring the floatation cost

aditya yanamandra

Faculty

28-Feb-24 20:39

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