.1. Kamani Ltd. is planning torais y the issu noo each at 10% discount. The underw ri tmg expenses are nd out the cost of debenhues in each of the following cases I. H debentmes are irredeemable. IT. If debentures are redeemable at 10111 year a ,\(p :: D( \ +CDT) 'RV-NP N ~,~- .· ------:-. Q. 2. Keenam Ltd. is planning to raise n crore by the issue o 12% preferen shares of noo each at 10'1/o discount. The underwriting expenses arc expecte to be 2%. Finclout the cost of preference share capital in each of the following .,,-- If p reference shares are ined eema b le .!f...P.refer~n,f! shares are redeemable at the end premium. Use short-cut method . ~ ey:,it 15% ' (2009 E) Q. 3. Calculate the Cost of (1) A com an isst1e 10 r cent irredeemable preference shares at ~95 each (face value :. U0O) . (i1) The cuuent market price of a share is Z90 and the expected dividend at •11t end_o.filig gm:t..n t year is Z4.5 with a growth rate of 8At,cent. ,, rornp any issue~ U0,00,000© er cent debentures of~ each at 10 per cent discount. The debentures are redeemable after the expiry of fixed period o£_7 ~ s. The company is in 35 per cent tax bracket. - 12-(1 - 0 3s +IC,\)-90 1- Assumin that the firm ate, compute the after tax cost of capi tal in the following cases :. ( i) A 14.596 preference shares sold at par. ( f:V ' JI,() !) , A perpetual bond sold at par, coupon rate bein 13.5%. 0Jcn ye~( si);>r,ooo per bond sold at 950. (Np q,5q) ' (i11) A common share selling at a market price of ~ and .. paying a current dividen o 9 er share which is; . expecte to grow at a rate 896 - .»D, As,s14m2 '·•~ , (ii0 I .1 . - 'Dv <s , ,,,'\ l£::]/ I~96 Preference Shares of I00 each, issued ,,,~~ · m, red eemable a t par after 6 years. Flolat1on cost 1s ·, and Dividend Distribution Tax i 15, . Use both ' hod. . · ~ ! 2 96 Debentures of fac e value oft!O00 each redeemable';~ · at par after 5 years, flotation cost bei~ Use both ·, · methods given the tax rat @30 . ,~'. \·1 \ • : Esc.. ?SC Deb - I 't ' .. . C-'..-. \ b-ft\C\_"'- COS.-+ f- 'MraJ1A.cA~OL 0·15 r.looooo IN AC<- =- z._~I 2oL O· I -EioL O·O:t- z.. 2000<:P ,41..0000 -- , lboL 1~2..oow co m pan y has the following capital structun:: on 1 July 20 1S: f-,wtd .,\\ Equity Shares (4,00,000) I096 Preference 20,00,000 (l~ De~entures 60,00,000 1¤ 2 v<J <A? X11.Q f6o 1 'j 00000 l \·3-=1-5'1/o . a:\' ~ '' ' ro -=- 1,60,00,000 e o[ a com It is expected company_-'-,:;..;.."'----share which at 7 per cent forever . Assume a 3_Qf~nt tax rate. ', _01;1r company s s / , 'i , , . .,,, ,, , ,,, , at : l 20 cur rently. The compauy}{aslp'aidld'i-vid~n~,' ', t share and th investor's market expects a growth o,f 5 per cent per year • ' I 11! ,l 11 1 \!1 1 iii You are ~equired to compute : ·r~te ~ It. 1 ' 1 1 1 1 '' •\' :~\ ·, /\ I1 ' 11n1 , ,I,, \,•' • " .. · ·, 1\ ,11 \ .1, 1) The company's Equity Cost of Ca~:ital:~ i0 If ' · the company's cost of capital is 8 per cent and the anticipated growth rate is 5 per cent per annum, calculate market price if the dividend of~ 1 is to be paid at the end of one year. \/'