Assume Income tax @40%. You are required to find out: Degree of operating Leverage, Degree of Financial Leverage and Degree of combined Leverage for each plan. Also calculate EPS and market price per share if P/E ratio in Plan A is 10 times and in B& C is 8 times. Suggest which form of financing should be employed if the firm follows the policy of seeking to maximize the price of its shares. Calculate the indifference point between plan A& B and Financial Break Even point for each plan and to suggest which plan has more financial risk. And Why?
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
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