per Test Paper 5. PART II: FINANCIAL MANAGEMENT (40 MARKS) Question No. 5A ora of now yerit bno ubiliono bro up to 229 You have been hired as a financial advisor to John Taylor. He has received two offers for playing professional basketball and wants to select the best offer, based on considerations of money only. Offer A is a $10m offer for $2m a year for 5 years. Offer B is a $11m offer of $1m a year for four years and $7m in year 5. What is your advice? (Hint: compare the present value of each contract by assuming a range of interest rate, say 8% -14%) Question No. 5B (5 Marks) T 5B. The entire share capital of a Zenith Limited consist of 1,00,000 equity share of Rs. 100 each. Its current earnings are Rs. 10,00,000 p.a. The company wants to raise additional funds of Rs. 25,00,000 by issuing new shares. The flotation cost is expected to be 10% of the face value. Find out the cost of equity capital given that the earnings are expected to remain same for coming years. (91013 woll (5 Marks)
per Test Paper 5. PART II: FINANCIAL MANAGEMENT (40 MARKS) Question No. 5A ora of now yerit bno ubiliono bro up to 229 You have been hired as a financial advisor to John Taylor. He has received two offers for playing professional basketball and wants to select the best offer, based on considerations of money only. Offer A is a $10m offer for $2m a year for 5 years. Offer B is a $11m offer of $1m a year for four years and $7m in year 5. What is your advice? (Hint: compare the present value of each contract by assuming a range of interest rate, say 8% -14%) Question No. 5B (5 Marks) T 5B. The entire share capital of a Zenith Limited consist of 1,00,000 equity share of Rs. 100 each. Its current earnings are Rs. 10,00,000 p.a. The company wants to raise additional funds of Rs. 25,00,000 by issuing new shares. The flotation cost is expected to be 10% of the face value. Find out the cost of equity capital given that the earnings are expected to remain same for coming years. (91013 woll (5 Marks)
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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Solution for question no 5A
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Test Paper
5.
PART II: FINANCIAL MANAGEMENT (40 MARKS)
Question No. 5A ora of now yerit bno ubiliono bro up to 229
You have been hired as a financial advisor to John Taylor. He has received two offers for playing professional
basketball and wants to select the best offer, based on considerations of money only. Offer A is a $10m offer
for $2m a year for 5 years. Offer B is a $11m offer of $1m a year for four years and $7m in year 5. What is your
advice? (Hint: compare the present value of each contract by assuming a range of interest rate, say 8% -14%)
Question No. 5B
(5 Marks)
T
5B. The entire share capital of a Zenith Limited consist of 1,00,000 equity share of Rs. 100 each. Its current
earnings are Rs. 10,00,000 p.a. The company wants to raise additional funds of Rs. 25,00,000 by issuing new
shares. The flotation cost is expected to be 10% of the face value. Find out the cost of equity capital given that
the earnings are expected to remain same for coming years.
(91013
woll
(5 Marks)
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