ASAP!! IN 20 minns Q.F Corporation needs additional capital of Rs. 1b. Firm decided to develop the following capital structure. Security Market value required return Debt Rs. 20,000,000 6.5% Preferred stock Rs. 30,000,000 9% Common stock Rs. 50,000,000 12.5% Its corporate tax rate is 35 percent. What is the firms weighted average cost of capital? State the pecking order theory. How will your shuffle the above capital structure in order to follow the Pecking order theory. Calculate the firm’s weighted average cost of capital, if the firm’s capital structure becomes as per pecking order theory.
Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
Common stock is a type of security/instrument issued to Equity shareholders of the Company. These are commonly known as equity shares in India. It is also called ‘Common equity
ASAP!! IN 20 minns
Q.F Corporation needs additional capital of Rs. 1b. Firm decided to develop the following capital structure.
Security Market value required return
Debt Rs. 20,000,000 6.5%
Common stock Rs. 50,000,000 12.5%
Its corporate tax rate is 35 percent.
- What is the firms weighted average cost of capital?
- State the pecking order theory. How will your shuffle the above capital structure in order to follow the Pecking order theory.
- Calculate the firm’s weighted average cost of capital, if the firm’s capital structure becomes as per pecking order theory.
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