In order to calculate the proportion of equity financing used by the company, which of the following should be used?

Authorised Share Capital

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Equity Share Capital plus Reserves and Surplus

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Equity Share Capital plus Preference Share Capital

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Equity Share Capital plus Long-term Debt

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Solution

The correct option is B Equity Share Capital plus Reserves and Surplus
Reserves and surpluses are part of owners equity, hence while calculating the cost of equity, reserves & surplus are also to be added with equity shares.

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