NUMERICAL PROBLEMS
  1. Compute the after-tax cost of debt if:
    1. Interest rate is 12% and tax rate is 30%.
    2. Interest rate is 10% and tax rate is 35%.
  2. A company issues 10-year debenture for Rs 1,00,000 with 8% coupon. The floatation cost is Rs 3,000 and the tax rate is 30%. Find the cost of debt.
  3. A firm’s expected dividend at the year-end is Rs 3.50. Growth rate in dividend is 6%. The share sells at Rs 35. The price of each new share net of floatation cost is Rs 32.
    1. Find out the cost of equity shares.
    2. What is the floatation cost?
    3. What is the cost of the new issue?
  4. A firm plans to issue some Rs 100 par preference share with a 10% dividend. The market price of each share is Rs 98 which is further lower at Rs 96 net of the floatation cost. Find out ...

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