Look at the following newspaper extracts from different issues of the Economic Times:

“SoftBank-backed InMobi aims to float an initial public offer on Nasdaq by this December…”

“Sajjan Jindal-controlled JSW Energy is planning to raise up to $ 1billion in a maiden dollar bond sale…”

1) Which corporate finance decision do the above news extracts relate to?     

2) Suppose a firm undertakes PBIT-EPS analysis to judge whether it should raise additional capital through debt or equity. The break-even PBIT level is found to be Rs. 20,03,01,026. If the projected PBIT the firm is expected to generate is equal to your respective enrolment number, what would be your recommendation to the firm?

3) Suppose the JSW Energy has 12 per cent debt financing and 88 per cent equity financing, what would be the WACC of the firm assuming the following additional information:

The debt financing is in the form of debentures with the YTM of 10 per cent. The tax rate applicable to the firm is 35 per cent.

The firm employs the CAPM for computing the cost of equity. The risk-free rate is 5.85 per cent, the beta of the firm is 0.66, and the expected return on the market portfolio is 13.5 per cent