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for eg,
mv of
loan=500k
pref. shares=250k
ord. shares=1250kand
cost of capital
loan =9%
prf.share=12%
ord. shares=18%in exam question, MV or cost of capital may not be given directly, in that case you have to find it by calculations.
once you have all MVs and cost of capital,
then,
multiply MV with cost of capital
so,
loan , 500k*9%=45k
pref.shares, 250k*12%=30k
ord.shares, 1250*18%=225kthen WACC=(45k+30k+225K)/(500k+250K+1250K)
=300/2000=0.15 or 15%this is the easiest method known to me.
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