1. Jamuna Group is evaluating the proposal of a new RMG factory called Jamuna Fabrics. Jamuna Group is renting a premise of 50,000 Square feet in Savar and Jamuna Fabrics is planning to use 10,000 Square feet from this facility. The rest of the premise is currently being used by another RMG factory of Jamuna Group called Jamuna Exclusive Fabrics. The Jamuna Exclusive Fabrics has already started its production. For Jamuna Fabrics, the total capital cost is USD 40,000 and is depreciated using the straight-line method over five years to a zero-salvage value. The monthly salary expense will be USD 2500, whereas annual utility and other expense will be USD 2,000. The annual total rent of 50,000 Square feet premise is USD 25,000. Jamuna Fabrics will need to annually pay USD 6000 as staff’s festival bonus. The cash flow from asset for Jamuna Fabrics is USD 28000 in the first year, followed by USD 12000 in the second year. Assume, initially Jamuna Fabrics will require USD 2,000 in working capital for this project. However, after the project they will not receive any amount from the working capital. The cash flow from asset for Jamuna Fabrics will be USD 10,000 in last three years. Besides, there are no additional cash inflows and outflows from this project and the project cycle is five years. The required rate of return Jamuna Exclusive Fabrics is 14% and for Jamuna Fabrics is 11 per cent. The tax rate is zero per cent. Calculate the NPV for Jamuna Fabrics. Show detailed calculation
Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
Common stock is a type of security/instrument issued to Equity shareholders of the Company. These are commonly known as equity shares in India. It is also called ‘Common equity
1. Jamuna Group is evaluating the proposal of a new RMG factory called Jamuna Fabrics. Jamuna Group is renting a premise of 50,000 Square feet in Savar and Jamuna Fabrics is planning to use 10,000 Square feet from this facility. The rest of the premise is currently being used by another RMG factory of Jamuna Group called Jamuna Exclusive Fabrics. The Jamuna Exclusive Fabrics has already started its production. For Jamuna Fabrics, the total capital cost is USD 40,000 and is
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