Reference no: EM131177460

A company is operating a diversified business in emerging capital market of MENA region, the capital structure is a bit conservative. - Financial leverage 38%, outstanding common share 19,704,600, book value share (BVS) 2.60, total liabilities AED49,000,000/-, preference share contribution is optional to soar the capacity of the company to 100% with incremental of 22% this will produce 1:1 incremental change is sales and restraint profitability. the micro and macro financial date is as follows: RF: 4%,EMV:2.25 rf, DOR : deviation positively from mid value by 10%, NIR; 6%,M:12, average period 2years, expectation of preference shareholder is around 1.34 Po, net sale under max capacity producing ATO of 1.80 as compared to 78% capacity of 1.64. 1- Produce a recap on cost of capital under capitalization scenario. 2- What would be the cost of the company resort to debt finance rather than diluting the power of common shareholder. 3- Produce practical scenario with clear objective and cost mitigation and reduction provided that the demand in the market is bit stagnant. 4- What would be the case if financial leverage soar by 20% under NID of 7% and reduction of EMR by 10% other things remain the same. 5- what professional advice that you will give if increase in liabilities by 10% produces 12% increase in sales under the same variable ratio and the same fixed cost. 6- assume the new management of corporation is planning to increase capitalization by 32% and keeping the common share ratio, what would be the right scenario provided that the target of WACOC is 16% WACOC = Po (common/C+P+D)+P1(P/C+P+D)+ki(D/P+D+C)