(a)organization strategy and industry practice, the bank current capital design is exceptionallyleveraged. Barakah Islamic Bank's President, Dato' Mirzan Daud Bakar has announced that thenew branch project will be financed by 49 percent debt from the bank Earnings Before Interest andTax (EBIT) which is RM10,540,500. The bank cost of equity capital is 17.8 percent and 7.3 percentof debt outstanding. The bank has corporate tax at 28.75 percent.Barakah Islamic Bank is planning to open another branch. With implementation ofi. Determine the Weightage Average Cost of Capital (WACC) of the new branch.ii. Mr Nubhan is interested to be a shareholder for the new bank branch. He has to pay a personaltax rate on share income of 12.3 percent, personal tax rate on debt income of 28.9 percent andcorporate tax of 43.98 percent. Calculate the gain from leverage for Mr. Nubhan.

The Weighted average cost of capital(WACC) refers to the financial ratio that calculates the overall…

(a) Barakah Islamic Bank is planning to open another branch. With implementation of organization strategy and industry practice, the bank current capital design is exceptionally leveraged. Barakah Islamic Bank's President, Dato' Mirzan Daud Bakar has announced that the new branch project will be financed by 49 percent debt from the bank Earnings Before Interest and Tax (EBIT) which is RM10,540,500. The bank cost of equity capital is 17.8 percent and 7.3 percent of debt outstanding. The bank has corporate tax at 28.75 percent. i. Determine the Weightage Average Cost of Capital (WACC) of the new branch. ii. Mr Nubhan is interested to be a shareholder for the new bank branch. He has to pay a personal tax rate on share income of 12.3 percent, personal tax rate on debt income of 28.9 percent and corporate tax of 43.98 percent. Calculate the gain from leverage for Mr. Nubhan.

(a) Barakah Islamic Bank is planning to open another branch. With implementation of organization strategy and industry practice, the bank current capital design is exceptionally leveraged. Barakah Islamic Bank's President, Dato' Mirzan Daud Bakar has announced that the new branch project will be financed by 49 percent debt from the bank Earnings Before Interest and Tax (EBIT) which is RM10,540,500. The bank cost of equity capital is 17.8 percent and 7.3 percent of debt outstanding. The bank has corporate tax at 28.75 percent. i. Determine the Weightage Average Cost of Capital (WACC) of the new branch. ii. Mr Nubhan is interested to be a shareholder for the new bank branch. He has to pay a personal tax rate on share income of 12.3 percent, personal tax rate on debt income of 28.9 percent and corporate tax of 43.98 percent. Calculate the gain from leverage for Mr. Nubhan.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 15P

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