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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
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
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