Question
1 (a) Surya Industries Ltd. has raised funds through issue of 10,000 debentures of Rs. 150 each at a discount of Rs. 10 per debenture
1 (a) Surya Industries Ltd. has raised funds through issue of 10,000 debentures of Rs. 150 each at a discount of Rs. 10 per debenture with 10 years maturity. The coupon rate is 16%. The floatation cost is Rs. 5 per debenture. The debentures are redeemable with a 10% premium. The corporate taxation rate is 40%. Calculate the cost of debentures. (b) The current market price of an equity share of Rs. 10 is Rs. 20. The current dividend per share is 20%. The dividends are expected to grow at a rate of 5%. Calculate the cost of equity based on dividend growth model.
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