User Account

All Pages

What happens to average cost of capital of funa ltd

Assignment Help Finance Basics
Reference no: EM133073278

The following information is available for two small companies Taxo Ltd. and Funa Ltd.

Net operating income : Taxo Ltd = R1 500 000 ; Funa Ltd = R1 500 000

Interest on debt: Taxo Ltd = Nil Funa Ltd: = R 600 000

Cost of equity:

Taxo Ltd= 16% Funa Ltd = 16%

Cost of debt: Taxo Ltd = 12% Funa Ltd = 12%

Note: In answering the questions below assume that the Net Income approach applies and there are no taxes.

Briefly explain, with calculations, what happens to average cost of capital of Funa Ltd. if it sells R3 million of additional equity (at par) to retire R3 million of outstanding debt?

Reference no: EM133073278

Questions Cloud

Bank report of condition and report of income : Evaluate the correlation between a bank's report of condition and report of income.
What is james loan monthly payment : The bank charged James with 6% interest rate. What is James' loan monthly payment. Provide loan amortization table for James for 12 months
Calculate the npv of the loan financing : CDE borrows $10,338 at a subsidized rate of 3.6% to invest in a project. The project lasts for 13 years and CDE repays the loan at the end of the project.
What should the bond sell for : The bond has 6 years to maturity and pays interest semi-annually. The market rate for bonds of this risk is currently 5%. What should the bond sell for
What happens to average cost of capital of funa ltd : The following information is available for two small companies Taxo Ltd. and Funa Ltd.
Make your network design using any program : Show the method/device used to keep your private address secure while accessing the Public Network - Make your network design using any program
Type of multinational capital budgeting decision : What additional information would be useful to the directors in making this type of multinational capital budgeting decision?
How much is the taxable income : ABC's pre-tax financial income is P1,800,000. Current income tax rate is 30%. How much is the taxable income
What are the reasons for bank failure : Q1. Despite the regulations that protect banks from failure, some do fail. What are the reasons for bank failure?

Reviews

Write a Review

Finance Basics Questions & Answers

  Two decimal places at the end of the calculations

You have $1,931.64 in a brokerage account, and you plan to deposit an additional $5,000 at the end of every future year until your account totals $200,000. You expect to earn 14% annually on the account. How many years will it take to reach you..

  Review and reflect on the application of the theory

You are required to assess the current financial performance of an organisation within the context of its markets and its economic performance

  Describe the incontestable clause in a life insurance policy

a. Describe the incontestable clause in a life insurance policy. b. What is the purpose of the incontestable clause?

  Find the internal rate of return for project

Tom is considering a business venture requiring an initial investment of $10000 and a further investment of $3000 after one year

  Firm standard deviation of returns over four years

What was this firm's standard deviation of returns over these four years?

  Changes in the interest rate up and down

Find the approximate bond's modified duration by using changes in the interest rate up and down by 5 basis points.

  What is the value of a share of stock

Assuming no information effects, what should the new price of a share of XYZ stock be when market participants first learn of this announcement?

  Write how you can create a pivot table

Write how you can create a Pivot table. Explain each step briefly. Write FOUR (4) advantages of Pivot table.

  Compute the margin turnover and return on investment for

creighton companys balance sheet and income statement are provided belowrequired1 compute the margin turnover and

  Estimating a corporate cost of capital

What are some best practice principles to remember for estimating a corporate cost of capital?

  What must be the value of the risk-free rate

Also suppose that it is possible to borrow at the risk-free rate. What must be the value of the risk-free rate?

  Compute the value of the average collection period

Sanders Prime Time Company has annual credit sales of $1,800,000 and accounts receivables of $210,000. Compute the value of the average collection period.

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