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TaruMaheshwari3

equity, debt,wacc

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Financial Management(KMB204) Computation of Cost of Capital Prepared by : Taru Maheshwari Sr.Asstt.Prof. ABESEC AKTU (Lucknow)
Cost of Debantures • Cost of Irredeemable Debt Kdb= I/ NP *100 • Cost of Irredeemable Debt Kda = Kdb(1-tax rate) • Cost of Redeemable Debt Kdb = Interest + (P-NP)/N / ½ (P+NP) Kda = Kdb(1-tax rate)
• Cost of Irredeemable Pref share Kp= D/P or NP • Cost of Redeemable Pref Share Kp = D + MV-NP/N / ½(MV+NP)
Cost of Equity • Dividend yield Method Ke = D/MP or D/NP • Dividend yield plus growthMethod Ke = D/MP +G • Earning Yield Method = EPS / NP or MP per share
Cost of Retained Earning • Kr= (D/ NP +G)(1-t)(1-b) • Weighted Average Cost of Capital Kr= ΣXW / ΣW

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Coc computation

  • 1. Financial Management(KMB204) Computation of Cost of Capital Prepared by : Taru Maheshwari Sr.Asstt.Prof. ABESEC AKTU (Lucknow)
  • 2. Cost of Debantures • Cost of Irredeemable Debt Kdb= I/ NP *100 • Cost of Irredeemable Debt Kda = Kdb(1-tax rate) • Cost of Redeemable Debt Kdb = Interest + (P-NP)/N / ½ (P+NP) Kda = Kdb(1-tax rate)
  • 3. • Cost of Irredeemable Pref share Kp= D/P or NP • Cost of Redeemable Pref Share Kp = D + MV-NP/N / ½(MV+NP)
  • 4. Cost of Equity • Dividend yield Method Ke = D/MP or D/NP • Dividend yield plus growthMethod Ke = D/MP +G • Earning Yield Method = EPS / NP or MP per share
  • 5. Cost of Retained Earning • Kr= (D/ NP +G)(1-t)(1-b) • Weighted Average Cost of Capital Kr= ΣXW / ΣW