Question
K.M.C. Ltd. Expects annual net income (EBIT) of Rs.2,00,000 and equity capitalization rate of 10%. The company has Rs.6,00,000; 8% Debentures. There is no corporate
K.M.C. Ltd. Expects annual net income (EBIT) of Rs.2,00,000 and equity capitalization rate of 10%. The company has Rs.6,00,000; 8% Debentures. There is no corporate income tax.
(A) Calculate the value of the firm and overall (weighted average) cost of capital according to the NI Theory.
(B) What will be the effect on the value of the firm and overall cost of capital, if:
(i) the firm decides to raise the amount of debentures by Rs.4,00,000 and uses the proceeds to repurchase equity shares.
(ii) the firm decides to redeem the debentures of Rs. 4,00,000 by issue of equity shares.
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Step: 1
A According to the Net Income NI Theory 1 Calculate the value of the firm V EBITX 1Tax rate V Equity ...
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
