Question
Ltd is expecting annual earnings before interest and tax of 1.5 Lakhs. The company has 10% debentures of 4 lakhs and cost of Equity capital
Ltd is expecting annual earnings before interest and tax of 1.5 Lakhs. The company has 10% debentures of 4 lakhs and cost of Equity capital is 12%. Calculate the total value of the firm and the overall cost of capital of the firm according to Net Income Approach. Also comment what will happen to the value of the firm and the overall cost of capital if debt is increased in the capital structure.
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Valuation Measuring and managing the values of companies
Authors: Mckinsey, Tim Koller, Marc Goedhart, David Wessel
5th edition
978-0470424650, 9780470889930, 470424656, 470889934, 978-047042470
