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please answer comprehensively Part D (20 Maris) Cost of Capital: You have recently been hired by Swan Motors, Inc. (SMI), in its relatively new treasury
please answer comprehensively
Part D (20 Maris) Cost of Capital: You have recently been hired by Swan Motors, Inc. (SMI), in its relatively new treasury management department. SMI was founded 8 years ago by Revanth Shergill. The cars manufactured by SMI are midsized and carry a price that allows the company to compete with other mainstream auto manufacturers. The company is privately owned by Mr. Revanth Shergill and his family, and it had sales of Rs. 97 million last year. When the company had sufficient capital, it would expand production Relatively little formal analysis has been used in its capital budgeting process. Joe has just read about capital budgeting techniques and has come to you for help. For starters, the company has never attempted to determine its cost of capital and Joe would like you to perform the analysis. You are required to 1. What could be the possible method that can be used to determine the cost of equity for the company? (4 Marks) 2. What is the importance of Beta used while finding the cost of equity and the steps to find the Beta? (4 Marks) 3. Where can you find the debt balance and its cost of debt? (4 Marks) 4. What is the importance tax element while finding the weighted average cost of capital? Joe missed using the same while calculating WACC? What do you think will happen to the Weighted Average cost of capital and why? (4 Marks) 5. During the Covid 19 situation, the company has got an option to use the moratorium period and not to pay any interest Should the company opt for the option or not? Please explain with reason (4 Marks)Step by Step Solution
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