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FINA 6000 Managing Finance

   

Added on  2020-04-13

7 Pages891 Words39 Views
Running head: MANAGING FINANCEManaging financeName of the studentName of the universityAuthor note

1MANAGING FINANCETable of ContentsQuestion 1 – Capital structure....................................................................................................2Question 2 – Dividend policy....................................................................................................4Reference....................................................................................................................................6

2MANAGING FINANCEQuestion 1 – Capital structure 1.Capital Structure Particulars201720162015Total Equity $ 61,342.00 $ 58,181.00 $ 53,915.00 Total debt $7,90,533.00 $7,81,021.00 $7,58,241.00 Total $8,51,875.00 $8,39,202.00 $8,12,156.00 % of equity7.20%6.93%6.64%% of debt 92.80%93.07%93.36%2.Cost of common equity and preferred equityRisk free rate = Rf = 2.1%Market return = Rm = 5.5%Beta = β = 1.52Cost of equity (ke) = Rf + β (Rm – Rf)ke = 2.10 +1.52 (5.50 – 2.10) = 7.268%3.Sources of debt The sources of debts for the company are the notes, bonds, debentures andcommercial papers that are issued by the company within the group. It also includes theacceptances that are the bills of exchanges which are accepted initially and discounted by thecompany that is subsequently rediscounted in the market. Further, the bill financing that isdelivered to the customers through acceptance and discounting the bills of exchange areconsidered as part of borrowings (Westpac.com.au 2017). 4.Before tax and after tax cost of debtBefore tax cost of debt is 5% and the tax rate is 30.55%. Therefore, after tax cost of debt is –

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