Calculate the cost of capital of organization, Financial Management

Assignment Help:

The following particulars relate to ABC Ltd. at the end of 2008:

(i) Rs. 500,000 equity shares of Rs. 10 each. Present dividend per share is Rs. 15; Market price Rs. 100 per share. Growth rate in dividend 5 per cent.

(ii) Retained earnings - Rs. 200,000.

(iii) 8% Rs. 500,000 preference shares of Rs. 50 each issued at a discount of 5%.

(iv) Debentures of Rs. 1,000 each, repayable at par in 2012, were issued as follows:

Type A: 200 A debenture of 13 per cent issued at a premium of 10 per cent.

Type B: 100 B debentures of 10 per cent issued at a premium of 10 per cent.

(v) 11% term-loan of Rs. 500,000. ABC Ltd. received the entire proceeds of the loan.

Assuming that ABC Ltd. is in a 50 per cent tax bracket and that it uses book values as weights, calculate the overall cost of capital of ABC Ltd.

Related Discussions:- Calculate the cost of capital of organization

Classification of sources of finance, CLASSIFICATION OF SOURCES OF FINANCE ...

CLASSIFICATION OF SOURCES OF FINANCE In the market, there are several sources of finance, with conflicting risk characteristics and with conflicting cost structures. Numerous m

Quantitative or mixed-methods study, Application: Critiquing a Qualitative,...

Application: Critiquing a Qualitative, Quantitative, or Mixed-Methods Study Over the last several weeks you have explored many qualitative, quantitative, and mixed-methods rese

Interpretations of profitability ratio''s, Interpretations of Profitability...

Interpretations of Profitability Ratio's - ROA: ROA or the Return on Assets ratio is the ratio of net profit to total assets and this ratio indicates whether total assets

State the meaning ofunlimited profit sharing, State the meaning ofUnlimited...

State the meaning ofUnlimited profit sharing Unlimited profit sharing means that equity shares have an unlimited potential for dividend payments and price appreciation. Which i

Compute full cost-financially-based rationale , Bill Nicholson wants you to...

Bill Nicholson wants you to help him prepare the financial case for moving the manufacturing operation to Andover. He has specifically expressed interest in getting answers to th

Revenue recognition or realisation, Revenue Recognition or Realisation ...

Revenue Recognition or Realisation The resources of business are utilized to earn revenue through sale of goods or rendering of services.The American Accounting Association d

Determine have mergers affected competition, Have mergers affected competit...

Have mergers affected competition? A: Federal Reserve data depict that measured on the local level, where competition occurs; markets have in fact experienced more banking comp

Discount rate determinants, Discount Rate Determinants The discount rat...

Discount Rate Determinants The discount rate is the firm weighted average cost of capital. It represents the opportunity cost of investing creditors and shareholders funds in o

State the term- overtrading, State the term- Overtrading Overtrading ta...

State the term- Overtrading Overtrading takes place when a company has insufficient finance for working capital to support its level of trading. The company is growing rapi

Expected value application in finance - safety stock level, Safety Stock Le...

Safety Stock Level The simple Economic Order Quantity (EOQ) model used in inventory management assumes that the reorder point will be at a level equal to (Lead time in number

Write Your Message!

Name

Email id

Message

Verfication Code

User Account

All Pages