Question
. Given the following information and spreadsheet of stock price and market (QP2 Dataset): The company has equity capital of INR 150 Lakh and Debt
. Given the following information and spreadsheet of stock price and market (QP2 Dataset):
The company has equity capital of INR 150 Lakh and Debt Capital INR 45 Lakh @15% p.a. Risk free return is 6% p.a. and return on market portfolio is 12%. Tax rate is 35%.
Answer the following questions.
- What is WACC for the company?
- How WACC will change if the company raises extra INR 10 Lakh @13% next year and tax rate changes to 30% (equity capital remain same).
- Comment on the Beta of stock (not more than 100 words).
- Would you like to invest in stock of this company given that you can easily earn 12% p.a. return by investing in other securities? Justify your answer in maximum 200 words with reference to its cost of capital.
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Financial Management Principles and Application
Authors: Arthur J. Keown, J. William Petty, David F. Scott, Jr.
10th edition
536514119, 536514110, 978-0536514110
