Computation of value of the firm, Financial Management

Assignment Help:

Q. Computation of Value of the Firm?

Computation of Value of the Firm (V) & Overall Cost of Capital:-

NI = EBIT - Interest

= 50,000 - 20,000 = 30,000

Interest = 2, 00,000 x 100/ NI= 20,000

Value of Equity (S) =NI / K = 30,000 / 12.5 % = 30,000 /12.5 e X 100 = 2, 40,000

Value of Debt = 2, 00,000

Value of Equity = 2, 40,000

Value of the Firm = S + B = 2, 40,000 + 2, 00,000 = 4, 40,000

Calculation of Overall Cost of Capital:-

K_o = (EBIT / V) X 100 = (50,000 / 4, 40,000) X 100 = 11.36%

Value of the Firm = 4, 40,000

Overall Cost of Capital = 11.36%

Related Discussions:- Computation of value of the firm

Different types of cash flow to bondholder of coupon bonds, What are the di...

What are the different types of cash flow to the bondholder of coupon bonds? Coupon bonds deliver two different kinds of cash flow to the bondholder are as follows: a. Face

Business proposal of a pet care shop, With the advent of globalization ther...

With the advent of globalization there had been much importance which is being given to the issues related to the general health of pets and other associated services as the people

What is planning, What is Planning Internal auditors must plan the audi...

What is Planning Internal auditors must plan the audit work so as to perform the audit in an effective manner.There must be sufficient audit programmes in existence which set o

Convertible bonds, Convertible bonds are the debt instruments issued which ...

Convertible bonds are the debt instruments issued which can be converted after a pre-specified date for a pre-specified number of securities (generally equity stock). I

Case study.., This case has been framed in order to test the skills in eval...

This case has been framed in order to test the skills in evaluating a credit request and reaching a correct decision. Perluence International is large manufacturer of petroleum and

What are the internal audits, What are the Internal audits Internal au...

What are the Internal audits Internal audit is seen as independent from management who are devising and implementing internal controls and must be able to provide advice on in

Determine current cost of equity, Your task is to determine CDW's current c...

Your task is to determine CDW's current cost of equity. Since the company is not yet publicly traded , you need to estimate its cost of equity from a set of comparable companies. U

Assessing creditworthiness of an issuer of bond, Following are the areas an...

Following are the areas an analyst should consider while assessing the creditworthiness of an issuer. 1. Security Limitations: The bond indenture shoul

Planning and controlling the various business activities , Explain and crit...

Explain and critically evaluate : a) The relevance of committed fixed costs in deciding the optimal mix of products to maximum a company's profit and the importance of relevant

Opportunity worth today, Assume that you can receive $25,000 per year forev...

Assume that you can receive $25,000 per year forever and that your cost of money is 7%. What is this opportunity worth today?

Write Your Message!

Name

Email id

Message

Verfication Code

User Account

All Pages