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Financial Management - Assignment

   

Added on  2021-02-19

14 Pages4052 Words57 Views
FinanceLeadership Management
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FINANCIALMANAGEMENT
Financial Management - Assignment_1

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Financial Management - Assignment_2

INTRODUCTIONFinancial Management relates to set of activities concerned with planning, managing andguiding finance processes like acquisition and usage of business funds (Allen, Hemming andPotter, 2013). Main aim of financial management is ensuring maximum or adequate return tocompany's shareholders by focusing on their expectations, earning capacity and value of shares.If funds are not handled correctly, an organisation will experience obstacles that could have aserious impact on its growth and progress. Financial management in any entity is a essential task.In order to attain organisational targets as well as objectives, it is the method of scheduling,arranging, managing and tracking economic assets. The study evaluates aspects of capitalstructure, sources of funds and techniques of investment appraisals in context of Kadlex Plc,Lexbel Plc and Happy Meal Limited respectively. Study also includes merits and demerits ofscrip dividends, right issue and techniques such as NPV, payback period, IRR etc.TASK 1 Capital Structure and Cost of Capital:Capital structure of a company defines its solvency and liquidity position. Cost of capitalis computed by companies to asses the cost of funds employed through different means.Consideration of capital structure along with cost of capital determines the effectiveness ofpotential and existing managerial and business decisions. Businesses using the cost of capitalmeasurement externally to assess how well a business project is worth the asset expense, andshareholders who use it to evaluate if an asset is worth the threat relative to the exchange. Capitalcost relies on the funding mechanism in use. Cost of Capital is indeed the essential yield torender a investment budgeting initiative valuable, like constructing a new factory. In this contextKadlex Plc is evaluating its funding structure to optimise WACC or Weighted Average Cost OfCapital. Following described steps are calculations to assess the same, as follows:First Step: Assess the growth (g)YearsPence1st212nd233rd254th275th282
Financial Management - Assignment_3

Here in above formula g implies to growth, n is symbol of years, S0 is first dividend whereas Snis last year distributed divided (Auber and Grudnitski, 2011). Note: For calculation purpose years is considered as 4 not 5 because dividend showing incrementof 4 times.Second Step: Computation of each funding source's rate:Cost of Equity (Ke ):Ke =(Sn*[(1+g)+g]) / P0 Ke = [28*(1+0.075)+0.075] / 2.65 = (28 x 1.15 ) / 2.65 =12.15 %Here, KeCost of equitySnFirst DividedgGrowth RateP0Ex dividedPreference Share (Kp):Kp=(j)/PfKp = 7 / 75 = 9.33 %Here, KpCost of Preference SharesjPreferential dividendPfex dividend preference share priceIrredeemable Bonds' cost or Debt's cost:Kdir =[i x (1 – t )] x (Po / Pn)Kdir = ([0.10*(1-0.30)])*(100/107) = 0.0654 or 6.54%Here, KdirCost of Irredeemable Bondsiinterest amount on debt3
Financial Management - Assignment_4

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