Deli Bhd introduces a new product line to expand its market in gaining wide market shares. Deli Bhd has spent RM1,500,000 in capital investment and RM460,000 in working capital investment. It has decided that 10% of its working capital investment is considered buffer working capital. The firm's operating profits of RM650,000 are subjected to the 10% interest on long-term financing, 6% interest on short-term financing, and 24% tax rate. The capital structure is 40% equity, 50% long-term debt, and 10% short-term debt. Required: a. Analyse the financing strategy adopted by the firm
Deli Bhd introduces a new product line to expand its market in gaining wide market shares. Deli Bhd has spent RM1,500,000 in capital investment and RM460,000 in working capital investment. It has decided that 10% of its working capital investment is considered buffer working capital. The firm's operating profits of RM650,000 are subjected to the 10% interest on long-term financing, 6% interest on short-term financing, and 24% tax rate. The capital structure is 40% equity, 50% long-term debt, and 10% short-term debt. Required: a. Analyse the financing strategy adopted by the firm
Chapter13: Capital Structure Concepts
Section: Chapter Questions
Problem 8P
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Deli Bhd introduces a new product line to expand its market in gaining wide market shares. Deli Bhd has spent RM1,500,000 in capital investment and RM460,000 in working capital investment. It has decided that 10% of its working capital investment is considered buffer working capital. The firm's operating profits of RM650,000 are subjected to the 10% interest on long-term financing, 6% interest on short-term financing, and 24% tax rate. The capital structure is 40% equity, 50% long-term debt, and 10% short-term debt.
Required:
a. Analyse the financing strategy adopted by the firm (show all workings).
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