Problem 5:A Company has a capital of Rs. 400000 divided into shares of Rs. 10 Each. It has majorexpansion programme requiring an investment of another Rs. 200000. The management isconsidering the following alternatives for raising this amount:a. Issue of 20000 shares of Rs. 10 eachb. Issue of 20000, 12% Preference shares of Rs. 10 eachc. Issue of 10% Debentures of Rs. 200000The company has a EBIT of Rs. 120000 pa. You are required to calculate the effect of each ofthe above modes of financing on the EPS presuming tax rate to be 50%, EBIT continues to bethe same even after expansion and EBIT increases by 40%

The objective of the question is to calculate the effect of different modes of financing on the…

Answered: Problem 5: A Company has a capital of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Task 6. ANGEL Company plans to acquire a processing plant for P40 million. To finance the acquisition, the business will issue 6% preference shares with a par value of P100 per share. The selling price of the preference shares is P150. the business is subject to a 30% income tax rate, and has declared dividends to preference shares of P6 the previous year. Required: Compute the cost of preference share.
Am. 121.
7. Assume a company is going to make an investment of $300,000 in a machine and the following are the cash flows that two different products would bring in years one through four. The company's required rate of return is 12%. Option A Option B Product A Product B $190,000 $150,000 190,000 180,000 60,000 60,000 20,000 70,000 Using the appropriate EXCEL spreadsheet in the Chapter11 NPV IRR Analysis.xlsx Download Chapter11 NPV IRR Analysis.xlsx, answer the following questions: What is the NPV for Option A? What is the NPV for Option B? What is the IRR for Option A? What is the IRR for Option B? PLEASE NOTE #1: The dollar amounts will be with "$" and commas as needed and rounded to two decimal places (i.e. $12,345.67). Round your IRR answers, in percentage format, to two decimal places (i.e. 12.34%). Given the above answers, which project should the…
Suppose there are two alternatives to finance a power generation project planned by ABC (Pvt.) Ltd. Alternative A is to financing the total capital of Rs. 450 Mn with equity and Alternative B is to employ Rs.150 Mn equity, Rs. 100 Mn by 14% debentures and the rest by a 15% bank loan. The corporate tax rate is 30% and the owners expects 18% dividend in both alternatives. Earnings before interest and tax (EBIT) for the project is estimated as Rs.250 Mn. a. Calculate weighted average cost of capital (WACC) for both alternatives.
13. The IBC Company is considering undertaking an investment that promises to have the following cash flows Period 0 is = -$100 Period 1 is= $150 Period 2 is = $50 Period 3 is = $50 If it waits a year, it can invest in an alternative (that is, mutually exclusive) investment that promises to pay Period 1 Period 2 Period 3 −$150 $250 $50 Assume a time value of money of 0.05. Which investment should the firm undertake? Use the present value method and the internal rate of return approaches. With the IRR approach, use the incremental cash flows.
Multiple choice: Assuming that SN North Company has the following net cash inflow: P60,000, P55,000, P50,000, and P45,000 for years 1, 2, 3, and 4, respectively. Assuming further that the company’s cost of capital is 25% for a net cost of investment of P120,000, the net present value, rounded off to the nearest whole number, is equivalent to: • P7,000• P7,300• P7,200• P7,100
Problem 3: A banking service project has an investment of $875,000. It has profits of $335,000 in years 1,3,5,7, and 9, and $157,000 in years 2,4,6,8,and 10. Assume the required rate of return is 20% and the inflation rate is 2.5%. Using the Net Present Value method, determine if the banking company should invest in this project.
please answer the question as in attached file asap. thanks
Question 2 A corporate treasury estimates that an investment of $ 50 million to expand the manufacturing capacity of its company's main product line would generate additional cash flows of $ 12 million per year for 5 years. Assuming a discount rate of 8% calculate: a) The Net Present value of the stream of returns of the expansion b) The profitability index c) The internal rate of return d) Should the company proceed with the investment?
Cecil Corporation is thinking about constructing a new facility. The company has usually distributed its earnings in the form of dividends. Common stock has typically been issued to finance capital expansion. Preferred stock and debt are not in the capital structure. (see the attached picture for the problem)

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