Reference no: EM133014913
Question - XYZ Ltd. wishes to raise finance of Rs. 10, 00,000 for meeting its investment plans. It has Rs. 240000 in form of Retained earnings.
The following details avail:
Debt/equity mix 30% / 70%
Earnings per share = Rs/ 4 Dividend payout: 50% of earnings
Cost of debt up to Rs. 1, 80,000 - 10% before tax
beyond Rs 1,80,000 - 16% before tax
Expected growth of dividend 10%, current market price: Rs. 44 and Tax rate 50%
Required -
a) Determine the pattern for raising additional finance.
b) Determine the post-tax average cost.
c) Determine the Cost of retained earnings.
d) Determine the Cost of equity.
e) Determine the Overall all Weighted Average Cost of capital.
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