Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. please answer correct q3. "retained earnings hav

please answer correct Q3. "Retained earnings have no explicit cost, so these funds...

90.2K

Verified Solution

Question

Finance

please answer correct

image

Q3. "Retained earnings have no explicit cost, so these funds are free of cost".comment. A Company's present capital structure is Rs. Equity Share (Rs. 100 per share) 14,00,000 12% Preference Share (Rs. 100 per share) 8,00,000 10% Debentures (Rs. 100 per debenture) Total 29,00,000 7,00.000 Market price of company's equity shares is 110 cach and it is expected that a dividend of Rs.10 per share will be declared after one year. Dividends are expected to rise at 5 % pa Tax rate applicable to company is 40%. Calculate weighted average cost of capital . b. The company needs to borrow Rs. 12 lacs for its expansion plan, the rate of interest is 15%, what will be the company's revised weighted average cost of capital? As a result of this decision the dividend will be increased from Rs. 10 to Rs. 12 per share and the market price of equity shares will decline from Rs. 110 to Rs. 105 per share

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students