This document contains 14 practice questions related to calculating the cost of capital for companies. The questions cover calculating the cost of various sources of capital such as debt, equity and preference shares. They involve calculations of post-tax cost of debt using tax rates, yields to maturity on bonds, dividend growth rates, and weighted average cost of capital (WACC). The final question asks to calculate the WACC given the capital structure, costs of different sources of capital, and market values of securities.
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Dividends are another key return metric to consider, as it speaks to real money dispensed by the organization into investors’ pocket. Dividend returns are less unpredictable as organizations don’t change their profits day by day, not at all like offer value which speaks to capital returns, that can demonstrate a wild swing in a limited capacity to focus time.
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This report seeks to provide an overview of the various sources of financing in India, looking at the trends for the last few years as well the outlook over the next year.
Emerging Trends in Corporate Finance - Sources of Corporate Financing and La...Resurgent India
There is a flurry of activities in the IPO space following stabilizing trends in the stock markets. Increasing number of companies are looking to raise funds to finance their business expansion and loan repayments and to meet the working capital requirements
Dividends are another key return metric to consider, as it speaks to real money dispensed by the organization into investors’ pocket. Dividend returns are less unpredictable as organizations don’t change their profits day by day, not at all like offer value which speaks to capital returns, that can demonstrate a wild swing in a limited capacity to focus time.
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This report seeks to provide an overview of the various sources of financing in India, looking at the trends for the last few years as well the outlook over the next year.
Emerging Trends in Corporate Finance - Sources of Corporate Financing and La...Resurgent India
There is a flurry of activities in the IPO space following stabilizing trends in the stock markets. Increasing number of companies are looking to raise funds to finance their business expansion and loan repayments and to meet the working capital requirements
HEMS berkembang sejak tahun 2009 akhir ternyata dari system dan alur kerja bengkel sepeda motor ini dapat diterapkan pada alur kerja workshop alat berat pada site pertambangan batubara , sehingga SIB berubah menjadi MMIS ( Maintenance Management Information System ) sebuah system manajemen maintenance
perawatan dan perbaikan kendaraan dan alat berat
dengan dukungan software desktop berbasis Microsoft access,
yang tahap awal di implementasikan pada workshop site
pertambangan batubara di Kintap – Kalimantan Selatan,
dilanjutkan ke Ampah Kalimantan Tengah, Melak – Kalimantan
Utara, serta Semboja – Kalimantan Timur.
HEMS - Heavy Equipment Management System sebagai Sistem
manajemen perawatan dan perbaikan kendaraan dan alat berat
sampai tahun 2011 MMIS
disamping diimplementasikan masih di lingkungan tambang
batubara di Jambi dan Tamiang - Kalteng, namun disini sudah
berkembang ke bidang lain yaitu galangan kapal, pengurugan,
di Gresik – Jawa Timur dan mulai merambah ke kontraktor sipil
di Rembang dan Denpasar.
MMIS sebagai sistem perawatan kendaraan, dan alat berat mulai diterapkan untuk mengelola peralatan pada
perusahaan kontraktor pilling ( tiang pancang ), pada posisi
ini sudah mulai menggunakan software aplikasi berbasis web
Perkembangan yang cukup drastis sebagai sebuah sistem informasi
khusus pengelolaan peralatan konstruksi untuk operasional dan
perawatan kendaraan mesin dan alat berat manajemen terjadi di
tahun 2017 dimana MMIS diharuskan berubah karena tuntutan
implementasi lapangan untuk mengelola perawatan peralatan
proyek tol Cimanggis – Cibitung sebuah project negara yang
sangat besar milik PT. Waskita Karya ( persero ) Tbk. dan
juga PT. Nindya Karya ( persero ) dengan modul dan fitur
yang jauh lebih lengkap untuk perusahaan jasa konstruksi
sehingga MMIS harus berubah menjadi HEMS ( Heavy Equipment
Management System ), perubahan yang sangat drastis dari
software yang berbasis desktop menjadi web khusus untuk
manajemen operasional dan perawatan kendaraan mesin dan
alat berat,
Perkembangan selanjutnya masih di sekitar BUMN, HEMS dipercaya
sebagai system manajemen tidak saja perawatan namun sudah
melebar ke operasional peralatan pada usaha rental dan jasa
konstruksi, dan kontraktor pekerjaan sipil di Bandar Lampung
, Manado.dan Pomalaa- Sulawesi Tenggara.
HEMS berkembang terus di tahun 2019 ke bidang usaha di luar
tambang dan kontraktor yaitu untuk manajemen distribusi pada
perusahaan distributor bahan bangunan di Kalimantan Barat,
dan untuk pengelolaan bengkel rekanan dari PT. Freeport dan
PT.Petrosea di Timika Papua.
tahun 2020 ini HEMS dipercaya dalam penanganan manajemen operasional dan perawatan peralatan kendaraan dan alat pada project
pembangunan PLTA ( Pembangkit Listrik Tenaga Air ) di Kerinci
Jambi dari PT. Kerinci Merangin Hydro, ( Bukaka - Kalla Group)
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Financial Management
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Assets
Liabilities
Total Reserves
$50,000
Demand Deposits
$180,000
U.S. Government Bonds
$110,000
Loans
$20,000
Assume the balance sheet above is for Eastlandia National Bank. The reserve requirement is 20%.
a. Given the current situation, how much money can Eastlandia National Bank lend to borrowers if it wants to keep all of its bonds?
b. Based on your answer in part (a), how much additional money can Eastlandia National Bank create? (Remember, how means how and why.)
c. Explain two reasons why the money supply may not increase by the amount you identified in part (b).
Spring 2013 Due Wed May. 15 by 4pm (my office)
1) Describe (in detail) the three forms of underwriting.
2) You want to set up an education trust for a relative starting in 2014. The trust will pay $25,000 a year starting in year 2022 and ending in year 2025. The stated annual percentage rate is 8% compounded annually.
a. How much will you have to invest in 2010 to achieve your objective?
b. How much will you have to invest each year from 2012 – 2017 to achieve your objective?
3) Samuelson Plastics has 7.5 percent preferred stock outstanding. Currently, this stock has a market value per share of $52 and a book value per share of $38. What is the cost of preferred stock?
4) Tidewater Fishing has a current beta of 1.21. The market risk premium is 8.9 percent and the risk-free rate of return is 3.2 percent. By how much will the cost of equity increase if the company expands its operations such that the company beta rises to 1.50?
5) Penn Corporation does not currently pay dividends. It is expected to begin paying dividends in year three (3) with a $2.50 dividend. This dividend is expected to grow at a rate of 14% for three years and then 6% every year after that forever. The required return on Penn’s stock is 16%. Calculate the price of Penn’s stock today.
6) Suppose Primerica has just paid a dividend of $1.75 per share. Sales and profits for Primerica are expected to grow at a rate of 5% per year. Its dividend is expected to grow by the same amount. If the required return is 12%, what is the value of a share of Primerica in 6 years?
7) IPOs typically experience underpricing. Describe (1) what is underpricing, (2) the evidence that underpricing occurs (be sure to include real world numbers/examples), and (3) why does underpricing occur.
8) Adelson's Electric had beginning long-term debt of $42,511 and ending long-term debt of $48,919. The beginning and ending total debt balances were $84,652 and $78,613, respectively. The interest paid was $4,767. What is the amount of the cash flow to creditors?
9) You arrived at work today to see the CFO, COO and most of the company’s top management team taken away in handcuffs. The only executive who was not arrested was the newly appointed CEO. Before you can even reach your cube, the CEO calls you into his office to explain some incomplete project an ...
1.Which of the following is considered a hybrid organizational for.docxelliotkimberlee
1.Which of the following is considered a hybrid organizational form?
Corporation
limited liability partnership
sole proprietorship
partnership
3. Teakap, Inc., has current assets of $ 1,456,312 and total assets of $4,812,369 for the year ending September 30, 2006. It also has current liabilities of $1,041,012, common equity of $1,500,000, and retained earnings of $1,468,347. How much long-term debt does the firm have?
$1,844,022
$2,303,010
$2,123,612
$803,010
5. Efficiency ratio: Gateway Corp. has an inventory turnover ratio of 5.6. What is the firm's days's sales in inventory?
61.7 days
57.9 days
65.2 days
64.3 days
6. Leverage ratio: Your firm has an equity multiplier of 2.47. What is its debt-to-equity ratio?
1.74
0
0.60
1.47
8. Present value: Jack Robbins is saving for a new car. He needs to have $ 21,000 for the car in three years. How much will he have to invest today in an account paying 8 percent annually to achieve his target? (Round to nearest dollar.)
$22,680
$26,454
$16,670
$19,444
9. PV of multiple cash flows: Ferris, Inc., has borrowed from their bank at a rate of 8 percent and will repay the loan with interest over the next five years. Their scheduled payments, starting at the end of the year are as follows—$450,000, $560,000, $750,000, $875,000, and $1,000,000. What is the present value of these payments? (Round to the nearest dollar.)
$2,735,200
$2,615,432
$2,431,224
$2,815,885
10. PV of multiple cash flows: Ajax Corp. is expecting the following cash flows—$79,000, $112,000, $164,000, $84,000, and $242,000—over the next five years. If the company's opportunity cost is 15 percent, what is the present value of these cash flows? (Round to the nearest dollar.)
$480,906
$414,322
$477,235
$429,560
11. Future value of an annuity: Jayadev Athreya has started on his first job. He plans to start saving for retirement early. He will invest $5,000 at the end of each year for the next 45 years in a fund that will earn a return of 10 percent. How much will Jayadev have at the end of 45 years? (Round to the nearest dollar.)
$3,594,524
$5,233,442
$1,745,600
$2,667,904
12. Serox stock was selling for $20 two years ago. The stock sold for $25 one year ago, and it is currently selling for $28. Serox pays a $1.10 dividend per year. What was the rate of return for owning Serox in the most recent year? (Round to the nearest percent.)
40%
12%
16%
32%
13. Bond price: Regatta, Inc., has six-year bonds outstanding that pay a 8.25 percent coupon rate. Investors buying the bond today can expect to earn a yield to maturity of 6.875 percent. What should the company's bonds be priced at today? Assume annual coupon payments. (Round to the nearest dollar.)
$1,066
$923
$972
$1,014
14. PV of dividends: Next year Jenkins Traders will pay a dividend of $3.00. It expects to increase its dividend by $0.25 in each of the following three years. If their required rate of return is 14 pe.
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1.Which of the following is considered a hybrid organizational for.docxhyacinthshackley2629
1.Which of the following is considered a hybrid organizational form?
Corporation
limited liability partnership
sole proprietorship
partnership
3. Teakap, Inc., has current assets of $ 1,456,312 and total assets of $4,812,369 for the year ending September 30, 2006. It also has current liabilities of $1,041,012, common equity of $1,500,000, and retained earnings of $1,468,347. How much long-term debt does the firm have?
$1,844,022
$2,303,010
$2,123,612
$803,010
5. Efficiency ratio: Gateway Corp. has an inventory turnover ratio of 5.6. What is the firm's days's sales in inventory?
61.7 days
57.9 days
65.2 days
64.3 days
6. Leverage ratio: Your firm has an equity multiplier of 2.47. What is its debt-to-equity ratio?
1.74
0
0.60
1.47
8. Present value: Jack Robbins is saving for a new car. He needs to have $ 21,000 for the car in three years. How much will he have to invest today in an account paying 8 percent annually to achieve his target? (Round to nearest dollar.)
$22,680
$26,454
$16,670
$19,444
9. PV of multiple cash flows: Ferris, Inc., has borrowed from their bank at a rate of 8 percent and will repay the loan with interest over the next five years. Their scheduled payments, starting at the end of the year are as follows—$450,000, $560,000, $750,000, $875,000, and $1,000,000. What is the present value of these payments? (Round to the nearest dollar.)
$2,735,200
$2,615,432
$2,431,224
$2,815,885
10. PV of multiple cash flows: Ajax Corp. is expecting the following cash flows—$79,000, $112,000, $164,000, $84,000, and $242,000—over the next five years. If the company's opportunity cost is 15 percent, what is the present value of these cash flows? (Round to the nearest dollar.)
$480,906
$414,322
$477,235
$429,560
11. Future value of an annuity: Jayadev Athreya has started on his first job. He plans to start saving for retirement early. He will invest $5,000 at the end of each year for the next 45 years in a fund that will earn a return of 10 percent. How much will Jayadev have at the end of 45 years? (Round to the nearest dollar.)
$3,594,524
$5,233,442
$1,745,600
$2,667,904
12. Serox stock was selling for $20 two years ago. The stock sold for $25 one year ago, and it is currently selling for $28. Serox pays a $1.10 dividend per year. What was the rate of return for owning Serox in the most recent year? (Round to the nearest percent.)
40%
12%
16%
32%
13. Bond price: Regatta, Inc., has six-year bonds outstanding that pay a 8.25 percent coupon rate. Investors buying the bond today can expect to earn a yield to maturity of 6.875 percent. What should the company's bonds be priced at today? Assume annual coupon payments. (Round to the nearest dollar.)
$1,066
$923
$972
$1,014
14. PV of dividends: Next year Jenkins Traders will pay a dividend of $3.00. It expects to increase its dividend by $0.25 in each of the following three years. If their required rate of return is 14 percent, what is the present value of their dividends over the ne.
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Just a game Assignment 3
1. What has made Louis Vuitton's business model successful in the Japanese luxury market?
2. What are the opportunities and challenges for Louis Vuitton in Japan?
3. What are the specifics of the Japanese fashion luxury market?
4. How did Louis Vuitton enter into the Japanese market originally? What were the other entry strategies it adopted later to strengthen its presence?
5. Will Louis Vuitton have any new challenges arise due to the global financial crisis? How does it overcome the new challenges?Assignment 3
1. What has made Louis Vuitton's business model successful in the Japanese luxury market?
2. What are the opportunities and challenges for Louis Vuitton in Japan?
3. What are the specifics of the Japanese fashion luxury market?
4. How did Louis Vuitton enter into the Japanese market originally? What were the other entry strategies it adopted later to strengthen its presence?
5. Will Louis Vuitton have any new challenges arise due to the global financial crisis? How does it overcome the new challenges?Assignment 3
1. What has made Louis Vuitton's business model successful in the Japanese luxury market?
2. What are the opportunities and challenges for Louis Vuitton in Japan?
3. What are the specifics of the Japanese fashion luxury market?
4. How did Louis Vuitton enter into the Japanese market originally? What were the other entry strategies it adopted later to strengthen its presence?
5. Will Louis Vuitton have any new challenges arise due to the global financial crisis? How does it overcome the new challenges?
Widal Agglutination Test: A rapid serological diagnosis of typhoid fever
Cost of capital
1. PGDM II- FINANCIAL MANAGEMENT
PRACTICE SET- II
COST OF CAPITAL
Q1. Hyperlink ltd. Issued 10,000,10%debentures of Rs.100 each on 1/4/2011.The cost of issue
Rs.25,000.The Companys Tax rate is 35%.Determine the cost o Debentures,if they were
Issued- (a)@par, (b)@ premium of 10%, & (c)@ discount of 10%.
Q2. Hyperlink ltd. Issued 10,000,10% debentures of Rs.100 each on 1/4/2011.The cost of issue
Rs.25,000 and brokerage paid @1%.The Companys Tax rate is 35%.Determine the cost of
Debentures,if they were Issued- (a)@par, (b)@ premium of 10%, & (c)@ discount of
10%.The debentures are redeemable after 10 years @ premium of 10%.
Q3. ABC Ltd. Wants to have an issue of NCD of Rs.10 crore @ the propotion of
Rs.100/Debenture having an coupon rate of 15% p.a. and redeemable ater 8 years at a
Premium of 5%.The the expenses of subscription almost covers 3%.If the corp. tax rate is
50%,what is the cost of Debenture to the company?
Q4. MAC Corp comes out with 12% preference shares of Rs.100 crores at the proportion of
Rs100/share with maturity period of 10 years at a premium of 5%, Cost of administration
And flotation amounts 2 crores.Calculate cost o Preference Capital?
Q5. ADG ltd. Has taken a loan of Rs.10 crore from UCO bank @ interest of 11%. What is the
Cost of term loan if Tax rate is 30%?
Q6. Pankaj metals are expected to declare a dividend of Rs.5/share and the growth is expected @
10%p.a.The current market price per share is Rs.120.Calculate the cost of Equity Capital?
Q7. What is the rate of return or a company if its beta is 1.5,Risk free rate of return is 8% and the
Market rate of retutn is 18%?
Q8. A firm is currently earning Rs. 100000 and its share is selling at rhe market price of Rs. 80.
The firm has 10000 shares outstanding and no debt. The firm’s payout is assumed to be 60%
And it earns 15% return on investment. Calculate the cost of equity capital.
Q9. ABC ltd. Requires Rs.400 crores to expand its activities in the southern zone of india.The
Companys CFO is planning to get Rs.250 crores through a fresh issue of equity shares to the
general public and reserve fund for the remaining amount.The equity investors expectation
of returns are 16%. Cost of procuring equity is 4%.Calculate Ke and Kr?
Q10. JCB ltd is a large company with several thousand shareholders.An investor buys 100 shares
2. Of the company at the beginning of the year at the market price of Rs.225.The par value of
Each share is Rs.10.During the year,the company pays 25% dividend.The price of the share
At the end of the year is Rs.267.50.Calculate the total return on investment?
Q11. The capital structure of a company consists of equity shares o 50 lakhs,10% pref. shares
Of Rs.10 lakhs and 12% debentures of Rs.40 lakhs. The cost of equity capital for the
Company is 14.7% and IT rate or the Co. is 30%.Calculate WACC?
Q12.AXIS Ltd. Has paid a dividendof 40% on its share of Rs.10 in the current year.The dividend
Are growing @ 6% p.a.The cost of equity capital is 16%.The finance managers of various
Zones met to take stock of competitors growth and dividend policies and come out with the
Following suggestions to maximize the wealth of the shareholders,As the CFO of the co.you
Are require to analyze each suggestion and to recommend suitable course of action.
Alternative 1: Inc. the growth rate to 7% and lower Ke to 15%.
Alternative 2: Inc. the growth rate to 7% and Inc. Ke to 17%.
Alternative 3: Lower the growth rate to 4% and lower Ke to 15%.
Alternative 4: Lower the growth rate to 4% and Inc. Ke to 17%.
Alternative 5: Inc. the growth rate to 7% and lower Ke to 14%.
Q13. The capital structure of Hyperlink ltd. Is :-
The Market price per Equity share is Rs.32.The Company is expected to declare a
Dividend per share of Rs.2 and there will be a growth of 10% for the next 5 years. The
Preference shares are redeemable at a premium of Rs.5/share after 8 years and currently
Traded at Rs.84.Debenture redemption will take place after 7 years @ a premium of Rs.5
Per debenture and their current price is Rs.90 per unit. The Tax rate is 40%. Cal. WACC?
CAPITAL STRUCTURE RUPEES
(IN LAKHS)
Equity Capital (Rs.10 par value) 200
14% Preference Share Capital Rs.100 each 100
Retained Earnings 100
12% Debentures (Rs.100 each) 300
11% Term loan from IDBI 50
Total 750
3. Q14. ABC Ltd. Wants to enter in to the arena of fabrication next year for which it requires Rs.20
Crores to purchase new equipments. The CFO made the following details-
The amount required will be raised in equal proportion by Debt and Equity (Consist of
new issue and retained earnings).
The company expects to earn Rs.4 crores as profit by the end of the year out of which it
pays out 50%.
The debt will be raised equally from ICICI @ 15% and Axis @ 16%.
The current market price per equity share is Rs.24 and dividend payout is Rs.2.40. Tax
rate is 50%. Calculate WACC?