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Assignment # 02

Last Date Jul 21, 2014

Assignment Question:
Seasons Corporation is a listed company which produces cooking oil. Now the company has
an intention to introduce its new product range of “Frozen items” in the market. For this
purpose a new plant is required. This project will require a lot of funds. Company has a plan
to finance it by issuing bonds and stocks in the following manner:

1. Bonds issued to five companies:
Company Book value of
Bond (Rs.)
YTM (%)
KK Company 1,500,000 6.5
Allied Company 1,000,000 6
N&T Technologies 2,000,000 8
Ziema Company 2,5000,00 7.5
Aazam Textile Company 3,000.000 5

2. Common stock:
65,000 common shares issued at Rs.100 per share. Current market price of common stock is
Rs.102 per share. Divided per common share in current year is Rs.5. Growth rate is 10%.

3. Preferred stock:
100,000 preferred stocks at par value of Rs.35 per share and market value of
preferred stock is Rs.3,500,000. Dividend per preferred share is Rs.3.2.
Income tax rate is 30%.

As a financial manager of the company, you are required to calculate:
1. After-tax cost of debt
2. Cost of equity
3. Cost of preferred stock
4. Weighted Average Cost of Capital (WACC)


Please read the following instructions carefully before preparing the assignment solution:
 Do prepare the solution after completely reading and understanding the questions.
Put your genuine efforts in order to understand the concepts and calculations thoroughly.
Provide complete calculations for all parts of the questions.


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------------------------< BEST OF LUCK >------------------------

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Replies to This Discussion

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very interesting :)

Cost of Debt after Tax = Interest Rate x ( 1 - Tax Rate )

Please Discuss here about this assignment.Thanks

Our main purpose here discussion not just Solution

We are here with you hands in hands to facilitate your learning and do not appreciate the idea of copying or replicating solutions.

MERA cot of debt 5.04

cost of equity 14.9% aya hai.. or ksi or ka kc change aya kya???

brother jtna aap se solved kr  lye ha share kr dye.

cost of equity=14.1

cost of equity=14.1

 Cost of Debt? kha sy lee ha app ny?????????????????

AMIR where are you yeh batao cost of equity kliye dividend jo dia hai wo tu current year ka hai hme next year ka dividend lena hai na for calculating Re????

 SHARIQ(MBA 5th semseter)

Current Year Dividend + Growth Year = Next Year Dividend

or agr aisa hai tu pora solution main modification karna hogi :)


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