TABLE OF CONTENT INTRODUCTION MAIN BODY CONCLUSION REFERENCES
INTRODUCTION Corporate accounting refers to the branch of accounting that deals with recording of accounting transaction of the companies for the preparation of financial statements such as income statement, cash flow statement, balance sheet, analysis and also for the interpretation of financial results of the companies. Corporate accounting also helps the enterprise in ensuring a optimum capital structure analysing the cost of every option. With use of corporate accounting managers also take various investments decisions about the profitability of the proposed investments. Present report in based over application of concepts and techniques of corporate accounting for deciding the ways of raising capital that is optimum. It will also provide the company about the viability of investments in new proposed products by measuring the cash flows that will be generated by the company. This will enhance the understanding about the concepts of various accounting tools for effective decision making. Concepts will be explained through the numerical examples in the report.
Financial Proposal Company is currently having a capital structureofissuedsharecapital valued at 50c that equals to 75 million andwiththedebtcapitalof105 million. Company is having higher of the debt capital in comparison with the equity capital. Cost of equity of the unlevered firm is 12% and the cost of long term debt is 4%.Companyishavingoptimum capital structures as the market value of shares is €1.25 each.
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Recommendation Under the current capital structure company is having the cost of capital of 11.63%. From the option of only debt or only equity it will be having the lowest cost of capital under debt. Under the MM approach the cost of equity will decrease in equity option. While in the debt option cost of equity will rise to 16.30%. Though the option of debt appears to be more beneficial due to its lower cost of capital. But at the same it will also be raising the required rate of return over equity also.
Investment Proposal
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CONCLUSION Under the financial plan it should raise capital using only Equity option. As this is the most beneficial option with slight increase in its overall cost. Under the investments plan it is identified that it should not adopt the production plan. as company will not be profitable for the company.
REFERENCES Allen, A.M., Ramanna, K. and Roychowdhury, S., 2018. Auditor lobbyingonaccountingstandards.JournalofLaw,Finance& Accounting, Forthcoming. Zeff, S.A., 2018. An Introduction to Corporate Accounting Standards: DetectingPaton'sandLittleton'sInfluences.AccountingHistorians Journal,45(1), pp.45-67.
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