A public limited company was recently formed to manufacture a new product. It has the following capital structure in the market value terms:
Debentures Rs. 7,000,000
Preferred stock 1,000,000
Common stock (320,000 shares) 8,000,000
Total capital Rs.16,000,000
The company has a marginal tax rate of 40%. A study of publicly held companies in this line of business suggests that the required return on equity is about 17%. The company's debt is currently yielding 13%, and its preferred stock is yielding 15%.
Required:
Compute the firm's present weighted average cost of capital.