What gordon divident capitalization model is

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Question 1: The market value of equity and debt is Rs. 10,00,000 and Rs. 5,00,000 respectively. The cost of equity is 18% and that of debt is 13%. If the tax rate is 35%. The weighted average cost of funds taking market value as weighted is

a.) 13%

b.)13.82%

c.) 14%

d.) 14.62%

Question 2: If the degree of operating leverage of a company is increased by 30% while the degree of financial leverage is decreased by 20%. What will be the changes in the degree of total leverage?

a.)2% increases

b.)3% increases

c.)4% increases

d.)2% decreases

Question 3: A firm present market price of the share is Rs.40 and it's EPS is Rs. 12. The firm planning to declare 45% of this as dividends. If the firm reinvests it's retained earnings at the rate of 14% the cost of its equity according to Gordon divident capitalization model is:

a.)20%

b.)21.20%

c.)22%

d.)26.20%

Reference no: EM132567537

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