M/s. Lucky Cement Company Limited has levered beta of 1.35 at 35% debt level. Risk free rate in market is 9% and investor required 5% risk premium to invest in market. Tax rate of company is 35%. Following is the schedule of borrowing rate obtained from bank for different level of debt level in capital structure. Firm anticipating Rs. 200,000 Operating Profit (EBIT). DEBT RATE 0 0.1 0.1 0.1 0.2 0.105 0.3 0.11 0.35 0.12 0.45 0.14 0.55 0.16 Find Optimal Capital Structure of M/s. Lucky Cement Company Limited.
M/s. Lucky Cement Company Limited has levered beta of 1.35 at 35% debt level. Risk free rate in market is 9% and investor required 5% risk premium to invest in market. Tax rate of company is 35%. Following is the schedule of borrowing rate obtained from bank for different level of debt level in capital structure. Firm anticipating Rs. 200,000 Operating Profit (EBIT). DEBT RATE 0 0.1 0.1 0.1 0.2 0.105 0.3 0.11 0.35 0.12 0.45 0.14 0.55 0.16 Find Optimal Capital Structure of M/s. Lucky Cement Company Limited.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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M/s. Lucky Cement Company Limited has levered beta of 1.35 at 35% debt level. Risk free rate in market is 9% and investor required 5% risk premium to invest in market. Tax rate of company is 35%.
Following is the schedule of borrowing rate obtained from bank for different level of debt level in capital structure. Firm anticipating Rs. 200,000 Operating Profit (EBIT).
DEBT RATE
0 0.1
0.1 0.1
0.2 0.105
0.3 0.11
0.35 0.12
0.45 0.14
0.55 0.16
Find Optimal Capital Structure of M/s. Lucky Cement Company Limited.
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