1. **Problem Statement:** Calculate the Cost of Debt, Cost of Financial Loan, Cost of Equity, Cost of Preference, Cost of Retained Earnings, Overall Cost of Capital, and Weighted Average Cost of Capital (WACC) based on the provided financial data. 2. **Formulas and Important Rules:** - Cost of Debt (Kd) = \( \frac{\text{Interest Expense}}{\text{Total Debt}} \times (1 - \text{Tax Rate}) \) - Cost of Financial Loan is generally the interest rate on borrowings. - Cost of Equity (Ke) can be estimated using the Capital Asset Pricing Model (CAPM): \( Ke = R_f + \beta (R_m - R_f) \) but here we will estimate from net income and equity if no market data. - Cost of Preference (Kp) = \( \frac{\text{Preference Dividend}}{\text{Preference Share Capital}} \) - Cost of Retained Earnings is often approximated as Cost of Equity. - Overall Cost of Capital = Weighted average of costs of debt, equity, preference, and retained earnings. - WACC = \( \frac{E}{V}Ke + \frac{D}{V}Kd(1-T) + \frac{P}{V}Kp \) where \(E\) = Market value of equity, \(D\) = Market value of debt, \(P\) = Market value of preference shares, \(V = E + D + P\), and \(T\) = tax rate. 3. **Given Data Extracted:** - Finance Cost (Interest Expense) = 141,339 (2025) - Loan and Borrowings (Debt) = 46,018 (net change, approximate debt level not directly given, assume total debt from balance sheet or use given data) - Net Income (Loss) = (2,546,988) - Shareholders' Equity (BV) = 7,141,533 (2025) - Share Application Money = 3,430,000 - Capital Contribution by Parent Company (ESOP) = 2,689,279 - No explicit preference dividend or preference share capital given, assume zero or not applicable. - Tax Provision = 0 (no tax expense) 4. **Calculations:** **Step 1: Cost of Debt (Kd)** - Interest Expense = 141,339 - Approximate Debt (D) = 46,018 (assumed from loan and borrowings change, ideally total debt needed, but use this for calculation) - Tax Rate (T) = 0 (no tax provision) \[ Kd = \frac{141,339}{46,018} \times (1 - 0) = 3.07 = 307\% \] This unusually high value suggests debt amount is understated; typically, total debt should be higher. Without total debt, we cannot accurately calculate Kd. **Step 2: Cost of Financial Loan** - Same as Cost of Debt here: 307% (based on above) **Step 3: Cost of Equity (Ke)** - Using Net Income and Equity (BV): - Return on Equity (ROE) = \( \frac{\text{Net Income}}{\text{Shareholders' Equity}} = \frac{-2,546,988}{7,141,533} = -0.3566 = -35.66\% \) Negative ROE indicates loss, so cost of equity is negative or undefined in this context. **Step 4: Cost of Preference (Kp)** - No preference shares or dividends reported, so \( Kp = 0 \). **Step 5: Cost of Retained Earnings** - Usually approximated as Cost of Equity, so \( -35.66\% \) here. **Step 6: Overall Cost of Capital and WACC** - Market Value (MV) of Equity (E) = Shareholders' Equity + Share Application Money + Capital Contribution = 7,141,533 + 3,430,000 + 2,689,279 = 13,260,812 - Market Value of Debt (D) unknown, approximate as 46,018 (likely understated) - Market Value of Preference (P) = 0 - Total Value (V) = E + D + P = 13,260,812 + 46,018 + 0 = 13,306,830 WACC = \( \frac{E}{V}Ke + \frac{D}{V}Kd(1-T) + \frac{P}{V}Kp \) \[ = \frac{13,260,812}{13,306,830} \times (-0.3566) + \frac{46,018}{13,306,830} \times 3.07 + 0 = -0.355 + 0.011 = -0.344 \approx -34.4\% \] Negative WACC indicates losses and/or data insufficiency. 5. **Summary:** - Cost of Debt (Kd) approx 307% (likely inaccurate due to incomplete debt data) - Cost of Financial Loan same as Kd - Cost of Equity (Ke) approx -35.66% (loss) - Cost of Preference (Kp) = 0 - Cost of Retained Earnings approx -35.66% - Overall Cost of Capital and WACC approx -34.4% **Note:** The calculations are limited by incomplete data, especially total debt and market values. Normally, total debt and market values are needed for accurate WACC.