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- You are Required to;
i. Compute the component cost of: ordinary share capital, debt capital, preference share capital
ii. Compute the company’s current weighted average cost of...(Solved)
Thika ltd wishes to raise funds amounting to s. 10million to finance a project in the following
manner:
Sh. 6million from debt;
Sh. 4 million from floating new ordinary shares
The present capital structure of the company is made up as follows:
1. 600,000 fully paid ordinary shares of sh. 10 each
2. retained earnings of sh. 4 million
3. 200,000, 10% preferences shares of sh. 20 each
4. 40,000 6 % long term debenture of sh. 150 each
The current market value of the company’s ordinary shares is sh. 60 per share. The expected
ordinary share dividend in a year’s is sh. 2.40 per share. The average growth rate in both
dividends and earnings has been 10% over the past ten years and this growth rate is expected to
be maintained in the foreseeable future.
The company’s long term debentures currently change hands for sh. 100 each. The debentures
currently change for sh. 100 each. The debentures will mature in 100 years. The preference
shares were issued four years ago and still change hands at face value.
You are Required to;
i. Compute the component cost of: ordinary share capital, debt capital, preference share capital
ii. Compute the company’s current weighted average cost of capital
iii. Compute the company’s marginal cost of capital if it raised the additional sh. 10 million as
envisaged (assume a tax rate of 30%)
Date posted: February 9, 2022.
- In your own understanding, Briefly explain Marginal Cost of Capital (MCC)
(Solved)
In your own understanding, Briefly explain Marginal Cost of Capital (MCC)
Date posted: February 9, 2022.
- Explain the term Weighted Average Cost of Capital (WACC) and state the procedure on how it is calculated(Solved)
Explain the term Weighted Average Cost of Capital (WACC) and state the procedure on how it is calculated.
Date posted: February 9, 2022.
- An 18 year bond with 6% coupon and a par value of 1000Br paying interest semiannually is
selling for 700.89Br. Calculate the yield on the bond.
(Solved)
An 18 year bond with 6% coupon and a par value of 1000Br paying interest semiannually is
selling for 700.89Br. Calculate the yield on the bond.
Date posted: February 9, 2022.
- Assume you bought a 10%, 25 year bond at 842 Br with a promised yield to maturity of 12%.
You expect the bond’s yield to maturity...(Solved)
Assume you bought a 10%, 25 year bond at 842 Br with a promised yield to maturity of 12%.
You expect the bond’s yield to maturity to decline 8% in 5years. What will be the price of the
bond in 5 years, if the bonds par value is 1000Br?
Date posted: February 9, 2022.
- Exclusively discuss component cost of capital(Solved)
Exclusively discuss component cost of capital
Date posted: February 9, 2022.
- Define Profitability Index (PI)/Cost Benefit Ratio.(Solved)
Define Profitability Index (PI)/ Cost Benefit Ratio.
Date posted: February 9, 2022.
- Briefly explain Advantages of IRR in Financial Management.(Solved)
Briefly explain Advantages of IRR in Financial Management.
Date posted: February 9, 2022.
- Using the trial and error Method, outline the Steps in the calculation of IRR (Solved)
Using the trial and error Method, outline the Steps in the calculation of IRR
Date posted: February 9, 2022.
- What are the Advantages and disadvantages of using NPV to assess the viability of a venture?(Solved)
What are the Advantages and disadvantages of using NPV to assess the viability of a venture?
Date posted: February 9, 2022.
- Listing examples in each, state 2 methods of evaluating cash flows(Solved)
Listing examples in each, state 2 methods of evaluating cash flows
Date posted: February 9, 2022.
- List the requirements which need to be fulfilled by methods used to assess the viability of an investment in capital budgeting(Solved)
List the requirements which need to be fulfilled by methods used to assess the viability of an investment in capital budgeting
Date posted: February 9, 2022.
- Discuss 3 Classification of Investments(Solved)
Discuss 3 Classification of Investments
Date posted: February 9, 2022.
- Use the figure below to Calculate Quick (or Acid-Test) Ratio.
(Solved)
Date posted: February 9, 2022.
- Given that current ratio of XYZ Company in the year 2001 is 1.31times, and its current liability value is Ksh.540 Calculate the current asset value...(Solved)
Given that current ratio of XYZ Company in the year 2001 is 1.31times, and its current liability value is Ksh.540 Calculate the current asset value of XYZ's company.
Date posted: February 9, 2022.
- Discuss the term Ex-dividends(Solved)
Discuss the term Ex-dividend
Date posted: February 9, 2022.
- Define par value as used in financial management(Solved)
Define par value as used in financial management.
Date posted: February 9, 2022.
- List the advantages and disadvantages of quotations of companies in finance management(Solved)
List the advantages and disadvantages of quotations of companies in finance management
Date posted: February 9, 2022.
- List and Explain Members of the stock exchange(Solved)
List and Explain 2 Members of the stock exchange
Date posted: February 9, 2022.
- Define stock market
(Solved)
Define stock market
Date posted: February 9, 2022.
- Briefly explain the Roles of the Financial System in the Economy(Solved)
Briefly explain the Roles of the Financial System in the Economy.
Date posted: February 9, 2022.
- List four conditions for capital(financial Lease)(Solved)
List four conditions for capital(financial Lease)
Date posted: February 9, 2022.
- With relevant examples of where they are applied, explain two types of leases (Solved)
With relevant examples of where they are applied, explain two types of leases
Date posted: February 9, 2022.
- Outline 4 features of a valid bill of exchange(Solved)
Outline 4 features of a valid bill of exchange
Date posted: February 9, 2022.
- List 5 type of finance which is obtained from persons other than actual owners of the company. (Solved)
List 5 type of finance which is obtained from persons other than actual owners of the company.
Date posted: February 9, 2022.
- List and discuss Features of Bonds in finance management.(Solved)
List and discuss Features of Bonds in finance management.
Date posted: February 9, 2022.
- Highlight the Disadvantages of Using Ordinary Share Capital to a Company(Solved)
Highlight the Disadvantages of Using Ordinary Share Capital to a Company
Date posted: February 9, 2022.
- What are the advantages of Using Ordinary Share Capital by a Company?(Solved)
What are the advantages of Using Ordinary Share Capital by a Company?
Date posted: February 9, 2022.
- List at least five features of Ordinary Share Capital(Solved)
List at least five features of Ordinary Share Capital
Date posted: February 9, 2022.
- List the Rights to Ordinary Shareholders of a company
(Solved)
List the Rights to Ordinary Shareholders of a company
Date posted: February 9, 2022.