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Financial Management Assignment | Accounting

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Added on  2020-02-19

Financial Management Assignment | Accounting

   Added on 2020-02-19

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Bachelor of Accounting
Financial Management Assignment | Accounting_1
ContentsPart A: Calculation of time value of money...............................................................................1Part B – Role of Financial Management for ‘not for profit organizations’...............................3Introduction............................................................................................................................3Need for Financial Management in Not-for-profit Organisations..........................................3Role of financial management................................................................................................4Conclusion..............................................................................................................................5Bibliography...............................................................................................................................5Part A: Calculation of time value of moneya)Cost of debt, equity and preference sharesi)Cost of debt1
Financial Management Assignment | Accounting_2
Yield to maturity = 8.3%, tax rate = 40%Cost of debt = yield to maturity * (1-tax rate)= 8.3% * (1-0.4)= 4.98%ii)Cost of preference capital Dividend = 8%*$70 = $5.6, current market price = $76Cost of preferred stock = annual dividend on preferred stock / current market price of preferred stock= 5.6 / 76= 7.36%iii)Cost of EquityBeta = 1.05, risk free rate = 4%, Market return = 11.4%Cost of equity = risk free rate + beta (expected market return – risk free rate)= 4% + 1.05(0.114 – 0.04)= 11.77%b)WACC of SVI on pre-tax and after tax basis.After tax WACC = wdrd + wprp + were = 0.4 * 0.0498 + 0.1 * 0.0736 + 0.5 * 0.1177 = 0.01992 + 0.00736 + 0.05885= 8.61%Pre-tax WACC = WACCAT / (1-t) = 0.0861 / (1-0.4) = 14.35%2
Financial Management Assignment | Accounting_3

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