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The following is the capital structure of Simons Company Ltd. as on 31.12.2015: Equity shares:...

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The following is the capital structure of Simons Company Ltd. as on 31.12.2015: Equity shares: 10,000 shares (of 100 each) 10,00,000 10% Preference Shares (of 100 each) 4,00,000 12% Debentures 6,00,000 20,00,000 The market price of the company's share is * 110 and it is expected that a dividend of 10 per share would be declared for the year 20X6. The dividend growth rate is 6%: (i) If company is in the 50% tax bracket, compute weighted average cost of capital. (ii) Assuming that in order to finance an expansion plan, the company intends to borrow a fund of 10 lakhs bearing 14% rate of interest, what will be the company's revised weighted average cost of capital? This financing decision is expected to increase dividend from * 10 to 12 per share. However, the market price of equity share is expected to decline from 110 to 105 per share

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