Calculation of cost of capital, Financial Management

Assignment Help:

Q. Calculation of Cost of Capital?

Calculation of Cost of Capital: - Calculation of cost of capital includes:

(A) Calculation of cost of specific sources of finance

(B) Calculation of weighted average cost of capital

Calculation of Cost of Specific Sources of Finance: - It comprises:

(1) Cost of Debt: - A company may perhaps increase the debt in a number of ways. It may perhaps borrow funds from the financial institutions or else public either in the form of public deposits or debentures for a specific period of time at a specified rate of interest. A debenture or bond perhaps issued at par at a discount or at a premium.

Debt may either be irredeemable or else redeemable after a certain period.

(i) Cost of Irredeemable Debt:-

  • Cost of Irredeemable Debt prior to tax :- Formula for computing cost of debt before tax is:

                  Kdb =  (I / NP )X 100           

Kdb = Cost of debt before tax

I = Annual Interest Charges

NP = Net Proceeds from the issue of Debt


Related Discussions:- Calculation of cost of capital

Explain implications of deviations - purchasing power parity, Explain the i...

Explain the implications of the deviations from the purchasing power parity for countries’ competitive positions in the world market. Answer:  If exchange rate changes satisfy pu

Functions of financial manager, Functions of Financial Manager: - The finan...

Functions of Financial Manager: - The financial manager is a associate of top management. He is intimately associated with the formulation of financial policies as well as financia

I need urgent help in Financial Managment, How to get cost differential whe...

How to get cost differential when 100% done by a single party only.

Calculate the net investment of the firm, Problem: i) Assume a firm bu...

Problem: i) Assume a firm buys a new tooling machine for Rs 2000,000, installation costs net of taxes are Rs 300,000. An existing asset has a book value of Rs 400,000 and the

Straddle strategy, An options strategy by which an investor owns a position...

An options strategy by which an investor owns a position in both a call and put market with the same strike price and expiration date.

Profit maximization-objectives of a business entity, Profit maximization ...

Profit maximization Traditionally, this was considered to be the major goal of the firm. Profit maximization refers to attaining the maximum possible profits throughout the yea

Virements, what is the relevance of virements to public sector accounting

what is the relevance of virements to public sector accounting

What do you signify by organisation of finance function, Q. What do you sig...

Q. What do you signify by Organisation of Finance Function? Describe the functions of Financial Manager. Ans. Organisation of Finance Function: - Organization of finance functi

What is the role of a broker in security transactions, What is the role of ...

What is the role of a broker in security transactions? How are brokers compensated? Brokers manage orders to sell or buy securities. Brokers are agents who deal on behalf of an

Exchange requirements-, Exchange Requirements To ensure money supply, s...

Exchange Requirements To ensure money supply, some central banks require some or all of its foreign exchange receipts (generally from exports) be exchanged for the local curren

Write Your Message!

Captcha
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!

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