User Account

All Pages

Explain why cost of internal equity may be different

Assignment Help Finance Basics
Reference no: EM132546635

A transport company is interested in measuring its specific cost of capital of different sources as well as the overall cost of capital the following information is provided and is associated with the sale of equity shares preference share and debentures. Equity share the current market price of equity is 125 per share and the firm is expected to pay a dividend of 15 at the end of the current year. Growth rate in dividends is 9%.the new equity share can be sold at 123 per share (an underwriting fee of 2 per share is payable) the 15% preference share of 100 each can be sold at premium of 10% (an underwriting fee of 2 per share is payable) the company sell 15 years 14% debentures of 1,000 each for 970.tax rate is 48%, further the book value of different sources is as follow

Sources Book value
Equity share capital 600
Preference share 300
Long term debts 200

Required

· Specific cost of capital

· Weighted average cost of capital

Explain why cost of internal equity may be different from cost of external equity

Reference no: EM132546635

Questions Cloud

Dollar values of positions in x and y respectively : If you decide to hold 25% of your complete portfolio in the risky portfolio and 75% in the Treasury notes then calculate the dollar values
Find the degree of operating leverage is : Hamilton Company has sales of 2,000 units at $30 per unit. Variable expenses are 40%. Find the degree of operating leverage is.
What is the total number of shares to be used : The company granted options to certain executives to purchase 9,000 of its ordinary shares at 70 each. What is the total number of shares to be used
Corporate social responsibility of corporations : Corporate Social Responsibility of corporations. Ethical Practices in Corporate Finance: with conclusion.
Explain why cost of internal equity may be different : A transport company is interested in measuring its specific cost of capital of different sources as well as the overall cost of capital
Find the entry to record the payment of net pay : The following totals for the month of June were taken from the payroll register of Arcon Company: Find the entry to record the payment of net pay
What sales must have amounted to : What sales must have amounted to? Vermont Company's break-even point in sales is $950,000, and its variable expenses are 60% of sales.
Contrast the three investment appraisal methods npv : Explain: compare and contrast the three investment appraisal methods NPV, IRR, Payback Period
Hedging currency exposure : What is a foreign currency swap? Can foreign currency swaps help Sask Power hedge the currency exposure in its U.S. dollar debt?

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd