8. X Ltd. requires additional finance of `20 lakhs for meeting its investment plans. It has `4...

Question:

8. X Ltd. requires additional finance of `20 lakhs for meeting its investment plans. It has `4 lakh in the form of retained earnings available for investment purposes. The following are the further details:

(i) Debt–equity mix, 40:60

(ii) Cost of debt: up to `4,00,000, 10% (before tax)

Beyond `4,00,000, 12% (before tax)

(iii) Earnings per share, `5

(iv) Dividend payout, 60% of earnings

(v) Expected growth rate in dividend, 5%

(vi) Current market price per share, `35

(vii) Tax rate, 35%

Compute the overall weighted average after tax cost of additional finance.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Financial Management

ISBN: 9789352605606

1st Edition

Authors: Swapan Sarkar, Bappaditya Biswas, Samyabrata Das, Ashish Kumar Sana

See More Books

Question Posted: Jul 23, 2024 07:01 AM

See More Questions

A small piece of zinc is dissolved in 50.00 mL of 1.035M HCl. At the conclusion of the reaction, the concentration of the 50.00 mL sample is redetermined and found to be 0.812 M HCl. What must have...
If you have $ 8,500 today, and you could earn 3 percent interest per year, how many years would it be before you would accumulate $ 10,000 (assume annual compounding)? See earlier NOTE regarding...
Use Excels filtering capability to (1) extract all orders for control panels, (2) all orders for quantities of less than 500 units, and (3) all orders for control panels with quantities of less than...
In 2019, you gave $15,000 worth of stock to your best friend. In 2020, the stock is valued at $25,000. a. What was the gift tax in 2019? b. What is the total amount removed from your estate in 2020?...
Using the data below from the financial statement of Bali, Inc., compute the companys cash flow yield, cash flows to sales to assets, and free cash flow. Net sales ................ $ 1,600,000 Net...
Harris Bears and Morgan Toys Incorporated are two of the largest and most successful toymakers in the world, in terms of the products they sell and their receivables management practices. To evaluate...
7. In considering the most desirable Capital Structure for a company, the following estimates of the cost of debt and Equity Capital (after tax) have been made at various levels of debtequity mix:...
9. SWAN Ltd. has assets of `3,20,000 which have been financed with `1,04,000 of debt, `1,80,000 of equity, and a general reserve of `36,000. The companys total profit after interest and taxes for the...
The company you work for has asked you to write an introductory section to its budget manual. Some managers have complained that they do not really understand the reasons for spending such...
Your company has been quite successful in sending employees on international assignments. As the HR Manager responsible for selecting such employees, present a report to the management of your...
You will be looking at a particular market in the economy. I will assign the market to you arbitrarily. Please look for at the end of this document to identify which market you will be responsible...
How has face book influenced political candidate's electoral success? What is the relationship between social media technology called face book and electoral success?
1. Discuss the international strategies that organizations can pursue 2. Identify and compare the various modes of of foreign market entry 3. Analyse the industry market 4. Evaluate relevant macro...
A bulk carrier was underway. The vessel was in ballast and hold washing was scheduled in preparation for taking the next cargo. An officer, bosun, and another deck crew conducted a risk assessment...
Anne Lockwood, manager of Oaks Mall Jewelry, wants to sell on credit, giving customers 3 months in which to pay. However, Anne will have to borrow from her bank to carry the accounts payable. The...
Should U.S. antidumping laws be stated in terms of average total costs or average variable costs?
Shelby Corporation was organized in January 2013 to operate an air conditioning sales and service business. The charter issued by the state authorized the following capital stock: Common stock, $1...
Ann, Dea, and Mirna contribute the following assets to begin partnership operations: Ann Dea Mirna Cash $150,000 $225,000 $175,000 Inventory 57,000 89,000 Plant Assets 350,000 100,000 Accounts...
The Artic Companys income statement and comparative balance sheets at December 31 of the current and previous year are shown below: ARTIC COMPANY Income Statement For the Year Ended December 31 Sales...

8. X Ltd. requires additional finance of `20 lakhs for meeting its investment plans. It has `4...

Question:

Step by Step Answer:

Financial Management

Students also viewed these Business questions