Calculate the firm Cost of Capital

Assignment Help Managerial Accounting

Reference no: EM132828007

Problem 1 - The CCC Corporation made available the following data as requested:

Total interest payments on bonds payable P60,000

Preferred stock dividends 20,000

Common Stock dividends 24,000

Annual growth on common stock dividend 2%

Market Values of:

Bonds Payable P400,000

Common Stock 300,000

Preferred Stock 200,000

Retained Earnings 100,000

Company Tax rate 30%

Stockholders' Marginal Tax Rate 70%

REQUIRED - Calculate the firm's Cost of Capital?

Problem 2 - The Graven Company is planning to spend P60,000 for a machine which will be depreciated on a straight line basis over ten period.

The machine will generate additional cash revenues of P12,000 a year.

Graven will incur additional costs for depreciation.

The Income Tax Rate is 35%

REQUIRED -

1. Determine the net income after tax.

2. Determine the Accounting Rate of return (ARR).

3. Determine the after tax annual cash flow.

4. Compute the payback period and the payback reciprocal.

Reference no: EM132828007

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