The Capital structure for ABC Ltd is given below. 8% debentures Rs.400,000 9% preference shares 100,000 Equity shares 500,000 New debentures would be sold at 10% coupon rate and will be sold at par. Preference shres will have an 11% rate and will also be sold at par. Equity shares currently selling at Rs.100/- can be sold at net the company is Rs.95/-. Management expects to pay a fully franked dividend at the end of the year of Rs.4/- and dividend should increse at an annual rate of 8% thereafter. The corporate taxrate is 50%. You are requied to calculate cost of debt, cost of preference capital and cost of equity capital
The Capital structure for ABC Ltd is given below. 8% debentures Rs.400,000 9% preference shares 100,000 Equity shares 500,000 New debentures would be sold at 10% coupon rate and will be sold at par. Preference shres will have an 11% rate and will also be sold at par. Equity shares currently selling at Rs.100/- can be sold at net the company is Rs.95/-. Management expects to pay a fully franked dividend at the end of the year of Rs.4/- and dividend should increse at an annual rate of 8% thereafter. The corporate taxrate is 50%. You are requied to calculate cost of debt, cost of preference capital and cost of equity capital
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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The Capital structure for ABC Ltd is given below.
8% debentures Rs.400,000
9%
Equity shares 500,000
New debentures would be sold at 10% coupon rate and will be sold at par. Preference shres will have an 11% rate and will also be sold at par. Equity shares currently selling at Rs.100/- can be sold at net the company is Rs.95/-. Management expects to pay a fully franked dividend at the end of the year of Rs.4/- and dividend should increse at an annual rate of 8% thereafter. The corporate taxrate is 50%.
You are requied to calculate cost of debt, cost of preference capital and
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