Finance

Q-14 Navya Limited wishes to raise additional capital of 10 lakhs for meeting its modernisation plan. It has 3,00,000 in the form of retained earnings available for investments purposes. The following are the further details: Debt/ equity mix 40%/60% Cost of debt (before tax) Upto 1.80,000 10% Beyond 1,80,000 16% Earnings per share 4 Dividend pay out 2 Expected growth rate in dividend 10% Current market price per share * 44 Tax rate 50% Required: (1) To determine the pattern for raising the additional finance. (ii) To calculate the post-tax average cost of additional debt