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1
· X
,
Ud iss ues Rs .50 000 8% d - l ,
. '
-• • 1' / . • o
" e Jcnlwcs. ic la x ra te appl ica ble lo the co1np;in y is 5 0 %.
·1·11c cus l o !'
f10at a t1on is ?o/r
- o.
c o mpute .
li1 e cos t o l de bt ca p ital if th e debentures a rc iss ued al (a) pa r (bJ
/ ()'1/,
"
pre mium (c) 5 % di sc o unt.
2. A
compa ny issu es R s. l 0,00,000 l 0% redee ma ble de bentures. T he cos t of /1 oat a ti o n a m o un ts to
R s .30,000. The d e bentures a re red eema bl e afte r 5 yea rs a nd th e tax ra te a ppl ica bl e to th e compuny is
5 0 % . C a lc ul a te the c ost of de be ntures if th ey are iss ued a t (a) pa r (b) a t 5% pre mium (c) a t S%
discount.
3. X Ltd ha s iss ued redeemabl e zero co upon bonds of Rs. / 00 eac h a t a di sco unt o f Rs.60 repaya bl e al
20 10
20 1 1
12 .75
13.40
j
d) The co mpan y has a fixed div idend pa you : r:il io . - -
c) The ex pected d i vidend on the llC\\ ' shi!rc:; 11mounts !o J< s . 14 . lo p er sh are .
8. The ent ire c 1p ital employed by '.1 compan
. . of' one lakh ,·qu 1ty ~han.: ~ of R~.1 OU -,·
y cun ~1st~ h
share s. Yo u arc rcc1u ired to ca IcuIate the cost ol- equ ity cap ital
. prcs urrn·ng that the earn mgs· o f l l .t
compan y arc CXjJCC
' te d to rema ·rn stable over the nex t few years.
9. /\BC Ltd . is earn ing a net profit of Rs.50,000 per annum. The sharehold ers required rate o:· return is
I 0%. It is expected that retained earnings, if dis tributed among the shareholders. can be in\ csted by
them in sec urit ies of similar type carrying return of I 0% per an num . It is further expected that the
share hold ers will have to incur 2% of the net dividends rece ived by th em as brokera ge cost for
mak ing new investments. The shareholders of the comp any are in 30% tax brac ket. You are requ i;·ed
lE
Equity (pa id-up) shan~capital
4,50,000 I -
I
\8
1,50,000 I