Capital structure of a company includes the following: (i) Equity share capital: 7,00,000 shares of face
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Capital structure of a company includes the following:
(i) Equity share capital: 7,00,000 shares of face value ₹10 each
(ii) Preference shares capital: 20,000, 12% shares of face value ₹100 each
(iii) Debt of ₹30,00,000 bearing a coupon rate of 15%
During the year, the company earned EAT of ₹15,00,000. The equity capitalization rate for this risk category of the company is 20% and the returns expected by preference shareholder are 10%, whereas return expected by debt holders are 18%. Calculate the value of company.
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