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MARKS 30

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%.

Required:
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)

SOLUTION GUIDELINES / SPECIAL INSTRUCTIONS:

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

WACC Kaisey Nikley please Share Computation....

round about keya ha kaya

Its Good then.

WACC kysy aye ga? please tell Me

Any One Have WACC Computation Please Share..

After cost of Debt = 23.1%

Cost of Equity = 15%

in ke kya value lane hai plz koi bta day aj extand day hai

E/V

D/V

Help pls :(

kindly give calculation of wacc

WACC

= Weight of equity*cost of equity + weight of debt*cost of debt

= 39%*14.90+60%*23.1%

Working.

WEIGHT OF EQUITY

=Current market value of equity/total market value of equity and debt

=6630000/16630000

=39%

 

WEIGHT OF DEBT

= current market value of debt/ total market value of equity and debt

 

=10000000/16630000

=60%

wacc kaise nikalna hai koi help kr dey


Assignment solution Fin622

correct if i m wrong


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