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    Acfm Worksheet

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    Bba 3 year project ppt

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    Acfm Worksheet

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    harsha.reddy.tws
    22 views3 pages
    Bba 3 year project ppt

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    ACFM WORKSHEET

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    Bba 3 year project ppt

    Copyright:

    © All Rights Reserved
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    Download as docx, pdf, or txt
    22 views3 pages

    Acfm Worksheet

    Uploaded by

    harsha.reddy.tws
    Bba 3 year project ppt

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    Worksheet

    Module 1- Cost of Capital

    1. A company issues RS 50,00,000, 10% redeemable debentures at a discount of 5%.


    The costs of floatation amount to 1,50,000. The debentures are redeemable after 5
    years at par. The tax rate of 50%. Calculate cost of debt capital.

    2. Ganga Pvt. Ltd. issues 50,00,000 8% debentures of RS 100 each at a premium of


    10%. The tax rate applicable to the company is 50%. Compute the after tax cost of
    debt.

    3. Kaveri Pvt. Ltd. issues 80,000, 9% debentures of RS 10 each at a discount of 10%.


    The tax rate applicable to the company is 40%. Compute the cost of debt. 1

    4. A company issues 20,000, 10% redeemable preference shares of RS 100 each,


    redeemable after 10 years at a premium of 5%. The cost of issue is RS 2 per share.
    Calculate the cost of redeemable preference share capital.

    5. The following is the capital structure and the firms expected after tax component costs
    of the various sources of finance

    Sources of Finance Amount Expected After tax costs (%)


    Equity share capital 6,50,000 20
    Retained earnings 2,50,000 20
    Preference share capital 1,50,000 15
    Debt capital 4,50,000 12

    Calculate the weighted average cost of capital.


    6. A company has on its books the following amounts and specific costs of each type of
    capital.
    Type of capital Book Value Market Value Specific costs (%)
    Debt 4,00,000 3,80,000 5
    Preference 1,00,000 1,10,000 8
    Equity 6,00,000 12,00,000 15
    Retained earnings 2,00,000 13
    13,00,000 16,90,000

    Determine the weighted average cost of capital using:


    i. Book Value Weights and
    ii. Market Value Weights
    How are they differing? Can you think of a situation where the weighted average cost of
    capital would be the same using either of the weights?

    7. You are required to determine the weighted average cost of capital of M/s Vinayaka
    enterprises Ltd, Bengaluru using
    i. Book Value Weights
    ii. Market Value Weights. The company’s present book value capital structure is
    Debenture (Rs 100 per debenture) = RS 16,00,000
    Preference shares (Rs 100 per share) = RS 4,00,000
    Equity shares (Rs 10 per share) = RS 20,00,000
    All these securities are traded in the capital markets. Recent prices are debentures at Rs
    110, preference shares at Rs 120 and equity shares at Rs 22. Anticipated external
    financing opportunities are
    i. Rs 100 per debenture redeemable at par, 10 years maturity, 8% coupon rate, 4%
    floatation cost, sale price Rs 100.
    ii. Rs 100 preference shares, redeemable at par, 15 years maturity, 10% dividend rate,
    5% floatation cost, sale price Rs 100.
    iii. Equity shares Rs 2 per share floatation cost, sale price Rs 22. In addition the dividend
    expected on equity shares at the end of the year Rs 2 per share, the anticipated growth
    rate in dividend is 5%. The tax rate is 50%
    8. A company issues 10,000, 15% preference shares of Rs 100/- each, cost of issue is Rs
    5 per share. Calculate the cost of preference capital, if the shares are issued
    a) At par
    b) At a premium of 20%
    c) At a discount of 5%

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