A company roll out its capital budget for the coming year at P20,000,000. The optimal capital structure is 40% debt and 60% equity. Earnings before taxes and interest is P34.667 million. The company follows the residual dividend policy and maintains the same capital structure. The company has P200,000,000 assets. The average interest rate on outstanding debt is 10% and tax rate is 40%. How much is the total interest payment? Electric Co. recently completed a reverse split where 1,000,000 shares becomes 500,000 shares. Prior to the reverse split the stock price is P75. What is the price of each stock after the transaction?
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
A company roll out its capital budget for the coming year at P20,000,000. The optimal capital structure is 40% debt and 60% equity. Earnings before taxes and interest is P34.667 million. The company follows the residual dividend policy and maintains the same capital structure. The company has P200,000,000 assets. The average interest rate on outstanding debt is 10% and tax rate is 40%. How much is the total interest payment?
Electric Co. recently completed a reverse split where 1,000,000 shares becomes 500,000 shares. Prior to the reverse split the stock price is P75. What is the price of each stock after the transaction?
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