Please read the following instructions before attempting your


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May 31, 2016. Please read the following instructions before attempting your assignment. Use a 12-point font in Times New Roman. Show all necessary formulas and calculations. This Assignment covers Lecture 18 to Lecture 23 of your course. Due date for the submission of Assignment is 31/5/2016 Upload your assignment with in due date and time. No assignment will be accepted after the due date and time. Be very careful while uploading your assignment, as no assignment will be replaced after it was uploaded on . No credit will be given to copied assignments. Question The following tabulation gives earnings per share figures for Powell Manufacturing during the preceding 10 years. The firm’s common stock, 140,000 shares outstanding, is now selling for Rs.50 a share, and expected dividend for the coming year (2008) is 50% of EPS for the year.  Investors expect past trends to continue, so “g” may be based on the historical earnings growth rate. Year                        EPS (Rs) 2.00 2.16 2.33 2.52 2.72 2.94 3.18 3.43 3.70 4.00 The current interest rate on new debt is 8%. The firm’s corporate tax rate is 40%. The firm’s market value capital structure, considered to be optimal, is as follows: Debt                           Rs.3,000,000 Common equity              7,000,000 Total Capital          Rs.10,000,000 Required: Calculate the firm’s after tax cost of new debt and of common equity, assuming that new equity comes only from reinvested cash flow.( calculate the cost of equity, assuming constant growth model) Find the firm’s WACC, assuming no new common stock is sold. jirokan
posted a question · May 31, 2016 at 12:55am

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