Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Aries Limited wishes to raise additional Finance of Rs.100 lakhs. The additional capital will be used for starting of a new project. For the need

image text in transcribed

Aries Limited wishes to raise additional Finance of Rs.100 lakhs. The additional capital will be used for starting of a new project. For the need for meetings Investment plan, it has 21 lakhs in the form of retained earnings is available for the investment purpose. The debt-equity mix is 30: 70 ratios the cost of debt up to 18 lacs is 10% before tax and beyond 18 lacks the cost of that the 16%. The Earning per share is Rs. 4:00 the dividend payout ratio is 50% of earnings. The expected growth rate in dividend is 10% the current market price per share is Rs.44. The tax rate applicable is 33% p.a. You are required to determine A. The pattern for raising the additional Finance. B. To determine the post-tax advantage, cost of additional debt C. To determine the cost of retained earnings and cost of equity D. And compute the overall Waited average cost of capital

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions