Reference no: EM132848723
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.
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