Comprehensive Analysis: Financial Resource Management and Performance

This comprehensive report examines the management of financial resources and performance, encompassing various aspects such as evaluating performance, planning and control, and contemporary management accounting methodologies. The report delves into key performance ratios, accounting treatments, and comparative performance analysis, specifically focusing on Microsoft. It explores cost management techniques, including job, process, and contract costing, along with fixed and variable cost distinctions. Cost-volume-profit analysis, relevant cost applications, and traditional budgeting are also discussed. The report further analyzes activity-based management, lean enterprise concepts, and value chain analysis, alongside methods of resource allocation and capital investment techniques. International financial markets and the tensions between financial and strategic objectives are also considered. The report provides a detailed understanding of financial resource management practices.

MANAGEMENT OF FINANCIAL
RESOURCES AND PERFORMANCE

Table of Contents
Part- 1 Evaluating performance and appraising limitations............................................................3
Part 2- Planning and control of an organization’s Resources..........................................................5
Part3- Contemporary Management Accounting Methodology.......................................................8
Part- 4 Methods of Resource Allocation for Achieving Corporate Strategy.................................11
Part 5-Tensions between Financial and Strategic Objectives........................................................14
Part 6 Capital Investment Techniques...........................................................................................17
Part 7- International Financial Market...........................................................................................19
Part 8-.............................................................................................................................................22
Appendix 1.....................................................................................................................................27
Appendix 2.....................................................................................................................................28
Appendix 3.....................................................................................................................................28
References......................................................................................................................................29
TABLE OF FIGURES
Figure 1: Process of ABC................................................................................................................9
Figure 2: Model of Activity Based Costing...................................................................................10
Figure 3: Microsoft value chain analysis.......................................................................................11
Figure 4: qualitative and quantitative issues of strategic performance..........................................20
Figure 5: Approaches to managing risk.........................................................................................21
Figure 6: Indirect benefits of International Finance......................................................................22
Figure 7: various sources of finance..............................................................................................23
Figure 8: Risk map for resolving issues........................................................................................25

Part- 1 Evaluating performance and appraising limitations
Key Performance Ratios
Analysis of performance
From above ratios it could be observed that company is operating is appropriate manner
as is debt-equity ratio is more than 2 and even an increasing trend can be observed in the
dividend paid (Wolf, 2014). The company is financially viable too, and the same can be accessed
through significant interest coverage ratio.
Accounting treatment of various assets

Asset Accounting treatment
Depreciation No allocation of depreciation on assets is done on different segments for
reporting presentations. A part of depreciation is stated as an overhead;
this is because it is impracticable for the company to identify separate
amounts of depreciation by each segment that is included in the profit or
loss. (AAS 116)
Inventory The company reflects its inventory at average cost, subjected to the one
which is lower (cost or market). The cost includes materials, labour, and
manufacturing overhead which arises at the time of purchase and
production of inventories. (AAS 102)
Capitalization The company capitalizes all software costs until the final product released
to the end users. The capitalized costs of software development are
amortized over the estimated lives (Approaches to Calculating the Cost of
Capital. Boundless Finance, 2017). Once the development reaches the
technological feasibility, then the costs associated with such software are
capitalized and amortized in terms of future expected benefits. (AAS 4)
Valuation The company uses quoted prices for identical assets or liabilities wherever
applicable, in active markets, for determining the fair value of the financial
instruments (Van Dooren, Bouckaert and Halligan, 2015). Model-based
valuation techniques are used by the company for the valuation of all the
inputs. (AAS 3)
 Treatment of intangible assets- Microsoft tests their intangible assets for recoverability;
in the light of changes in circumstances of a shift in strategic direction and profitability
expectations. Based on the results of our testing in the last fiscal year, it was determined
that the company would not be able to recover their carrying value and as a resulting
impairment was charged to the extent of the estimated fair value. Intangible assets are
amortized on straight line method (Johnson and Scholes, 2017). The estimated life of
identifiable intangible assets is expected to be 6.3 years.

 Differences in financial reporting- As per the analysis, there have been no differences
in the financial reporting of the company as compared to International Accounting
Standard.
1.3 Comparative Performance
After comparison of the financial performance of Microsoft to its competitors, it can be
said that the Total Revenue of the company decreased in 2015’s the 3 quarter -12.16 %. As
opposed to this, the revenue for other companies in the industry and the industry as a whole
increased by 29.94 %, in the same quarter (Shahzad, Rutherford and Sharfman, 2016). Although
Microsoft is a better performer from companies like Dow Jones Industrial, the company has been
continuously suffering from strong competition from Apple. Inc.
Microsoft mainly focuses on the analysis of processes undertaken within the organization
by fundamentally rethinking the way they improve customer service, reduce operational costs
thereby becoming world-class competitors (Saeidi and et al. 2015). Each process that either
result in finished good or as a base for the next process is evaluated separately. In the IT
industry’s which is multi-process, generic benchmarking is used to comparing information.
Part 2- Planning and control of an organization’s Resources
Treatment of indirect and direct cost- The direct costs are added to the cost of the product
whereas the indirect costs are reflected as an expense in the income statement or P&L account.
Different cost treatment of job, process and contracts
 Job costing: as per this method, identification of costs is made for each work separately
because each job entails its own specifications and scope.
 Contract costing: Contract costing is performed when the company invites tenders for
web development which involve heavy expenditure during an extended period of time
(Wang and Sarkis, 2013).
 Process costing- when a company engages in activities which involve a lot of processes
like that of Microsoft, this kind of costing is used. Microsoft develops its software
through a planned series of steps.

 Absorption costing- This costing type has its origin from managerial accounting which
expenses all costs associated with developing a particular product; this type of costing is
the time required by external reporting GAAP (generally accepted accounting principles).
Absorption costing is done for costs which are directly relatable to the development of
the product (Tantalo and Priem, 2016).
Distinction between fixed and variable cost
A company's cost which is linked to the amount of goods or services it produces is called
variable cost. The variable cost of the company increases and decreases with the volume of
production undertaken. On the other hand, the costs which do not vary with the level of output
are known as a fixed cost. This part of cost remains constant at each level of production.
Cost volume profit analysis Short-term decision analysis
The analysis is applied to ascertain the
manner in which change in cost and volume
affects operating as well as net income of
company (Harrison and Wicks, 2013). For
accomplishing the analysis, various
components such as sale price per unit are
assumed constant.
This technique is used by the company as a
new way for evaluating costs which assist in
managerial decision making. Instead of
evaluating components of cost this analysis,
re-arranges the costs into variable costs, fixed
costs, and mixed costs (Rivera, Muñoz and
Moneva, 2017). In this technique, the company
allocates salary to fixed costs and bonus to
variable costs.
Relevant cost and its application to decision-making
The objective cost of a business decision is determined by relevant costs. An objective
measure cost of a decision is a number of cash outflows that result from its implementation.
Thus, it assists in decision making through revealing the amount of cash outflow resulting from a
cost. Some of the relevant costs are future cash flows, avoidable cost, opportunity cost and
incremental cost.
Role and Limitations of Traditional Budgets

A detailed statement of financial results that are predictable for a given period of time in
the future is known as the process of Budgeting. Traditional functional budgets can be effective
only when the organization is divided into many units which together contribute to
organizational goal (Mir and Pinnington, 2014). If the entity runs on the basis of annual goals, it
may need a functional budget for a short period just to keep the company on the right track.
 Problems and motivational impact of functional annual budgets - The problem
associated with functional budgets is that it created unnecessary pressure in the mind of
the staff and promoted unhealthy competition (Guerreiro, 2015). However, if
communicated in a positive way can provide a guide to managers and their employees in
achieving the organizational objectives.
Alternatives to functional budgets
Budget Description
Activity-based budgets This type of budgeting is the one in which the
activities of the organization which incur
costs are recorded, and their relationships
with each other are defined and analyzed.
Continuous Budgets It is the process of continually adding months
to a multi-period budget with each passing
month by revising the assumptions of the
budget for every incremental period of the
budget (Endrikat, Guenther and Hoppe,
2014).
Beyond Budgeting Roundtable This technique emphasizes a holistic focus on
the objectives to be achieved and their
relation with the processes undertaken to
accomplish them. Microsoft encourages full-
scale recreation of processes instead of sub-
processes being optimized.

Part3- Contemporary Management Accounting Methodology
Role of Activity-Based Management
 ‘Relevance lost’ -The traditional system of accounting overhead is done through
allocating it to the product in the proportion of direct labour or machine hours which may
not reflect the actual consumption of resources. There is a relevant loss of useful
resources as the traditional management accounting fail to provide accurate product cost
(Grant, 2016). The traditional system of accounting has failed to keep pace with new
technologies by focusing on short-term profits instead of short-term financial measure of
non-performance. Traditional accounting focuses on volume-related drivers, like labour
hours, while the modern costing method uses transaction-based drivers, like a number of
orders received.
Appraisal of activity-based costing (ABC)-
This technique is considered as the modern alternative to the traditional system of accounting
that is absorption costing; this allows the managers to understand the product and net
profitability in a much better way. This also provides the management with improved
information for making value-based and leading to more effective managerial decisions. ABC
technique focuses on cost drivers- the activities increase costs. Thus this technique gives accurate
results in terms of cost and profitability.
Figure 1: Process of ABC
Activity-based costing fills the information needed for re-engineering and benchmarking by
providing cost of each activity separately. This costing method also provides operating
information about the true cost of services, products, processes, distribution channels, activities,

customer segments, projects and contracts (Garcia‐Castro and Francoeur, 2016). Activity-based
management provides value analysis, cost drivers, and performance measures that initiate
improvement efforts and decision-making.
Figure 2: Model of Activity Based Costing
Cost Management Methodology
Relationships among lean enterprise, business excellence and value chains
The concept of lean enterprise focuses on process and product innovation. Innovation is
not just constrained to the product but also on the value chain and business system. This concept
of lean management is extended to organization level. Implementation of principles of lean
enterprise and innovation process of value-chain throughout the organization improves the
financial performance of the company (Bodie, 2013). By lean enterprise, it is possible to outline
company’s advantages of baseline and its network of lean value. The value chain of Microsoft
does not include the traditional activities.
Contribution of financial analysis
Cost-benefit of quality Throughput accounting Analysis of waste Value analysis of the
activity chain
 A systematic
approach for
estimating the
cost and benefit
for controlling
 The principle-based
approach that
provides managers
with information that
supports decisions for
 For the purpose
of achieving a
general objective
of cost reduction
is important to
 A strategic tool for
analyzing
internal activities
of the firm. The
main analysis is to

quality. The
options that
provide benefits
are preserved.
improvement of
enterprise
profitability.
analyze the
activities which
do not contribute
to the product.
This is done by
process
management
through
implementation
of the lean
business process
model.
recognize
the activities which
are most valuable
to the entity and
the ones that need
improvement to
provide a
competitive
advantage.
Resource audit of the value chain
Figure 3: Microsoft value chain analysis
Competitive advantage is gained operational segment which is part of primary activities through
application of intelligent cloud which comprises public, private as well as hybrid server products.
The further highly complicated supply chain is maintained by Microsoft without any disruptions
in order to access competitive advantage.
Strategic management

The key that opens up avenues for management accounting is competitive assessment
advantage and strategic management in response to competitors (Baños-Caballero, García-Teruel
and Martínez-Solano, 2014). By contributing to strategic decisions in the company, as well as
more effective control of their operation, management accounting provides necessary
information for cost and profitability.
Appraise investments in advanced technology by incorporating tangible and intangible
benefits
 The company has invested in gaming roadmap over the next 18 months anchored
by two significant releases – Xbox One S and Project Scorpio and has also made
investments in areas of growth like virtual and reality videos, and e-Sports.
 The company is also investing its financial resources in an extensive portfolio of
hardware configurations and designs for Windows 10
Application of balanced scorecard to support the achievement of strategy and vision
Perspective Objective Measure Target
Financial New pricing % of revenue from new
applications
Improving channel mix
and reduction in the
cost of the transaction.
Customer Increasing the belief of
customer through
enhancing loyalty
75%
Internal
Business
Process
Efficient desktop
support for CS &M
employees
No. of desktop services
request which was
completed
500
Learning and
Growth
Increase leadership
position in OS market
Increase market share
of SQL 7.0 by country
region (Microsoft Corp
(NAS:MSFT) WACC
Microsoft Corp MSFT,
2017)

Part- 4 Methods of Resource Allocation for Achieving Corporate Strategy
Strategic planning: this is the first stage in resource allocation. This stage is concerned with
planning vision and goals for the future. The vision and strategic goals are accomplished through
achievement of objectives (Guerreiro, 2015).
Budgeting- in this stage, a budget is set for each activity to which the resources are to be
allocated. Resources are allocated on the basis of strategic planning and identifying that which
areas need maximum and minimum resources.
Logistical management- at this stage the resources are moved physically to areas requiring
them.
Criteria to evaluate the allocation of resources-
 One of the most important tools used by Microsoft to assist and monitor the resource
allocation program is the APR technique. Annual Performance Report is a reporting tool
which is used to track progress and accomplishments of resource allocation programs and
inform the management about the competitive advantage (Grant, 2016). The APR can is
an effective management tool that provides with high data quality to evaluate the entire
process if resource allocation.
 Identification and management of gaps between strategic need and availability-Gap
analysis provide the guide on how to develop strategies and initiatives for closing gaps
and mitigate associated risks by classifying activities on profitability and priority basis.
Re-engineering and business re-engineering
Microsoft continually seeks to radically restructure their organizations by concentrating
on the basic designs of their business processes. A business process can be reoffered to as set
tasks which are logically related to each other and capable of being performed to achieve a
defined outcome in the business.
 Principles of re-engineering and its impact on management style
Radical redesign associated with BPR has a positive correlation with the processes and
performance of the organizational. In this way, the management enhances the potency and

productivity of the business because BPR involves increment in the standard price of the
product. Implementation of BPR will also increase (Mir and Pinnington, 2014). BPR
implementation can also have some negative impact on organizational performance since the
execution of new processes may encounter problems of adjustment and change in the style of
management.
 Use of processes to eliminate delayed and unnecessary activities
For the purpose of eliminating unnecessary activities, there is a need to develop lean
business processes by managing processes and auditing from point to point; this improves
processes through reducing the time caused managing assets. Process management emphasizes
on prevention of waste and elimination of existing waste.
Alternative forms of Benchmarking
Competitive Benchmarking is performed in respect of the competitors and data is analyzed in
terms of what causes superior performance as compared to the competitor.
Internal This is used by an organization which has multiple units working in a similar
country.
Process Each process is compared to a similar process in other industry.
Generic Microsoft works on Generic benchmarking where the focus is placed on
technology innovations to be achieved.
Dynamics and stages of benchmarking
PLANNING- the processes to be benchmarked are identified along with the basis of
comparison.
ANALYSIS- the performance gap between the base for benchmark and the processes are

analyzed on the basis of data gathered.
INTEGRATION- preparing for implementation of the action.
ACTION- actions are implemented to the processes
MATURITY- involves continuous monitoring and learning of the changes in the processes.
 Best in- class Benchmarking- The inherent issues with best in class benchmarking is that
it is difficult to identify and analyze the best in class performance level when the standard
set is different from the benchmarked unit.
Part 5-Tensions between Financial and Strategic Objectives
Profit maximization Shareholder’s wealth maximization
This objective is achieved when the company
retains all its earnings for future investment.
This objective is achieved when the earnings
and profit are distributed among the
shareholders.
 Shareholders Expectations and interest- The Company has to strike a balance between
both the above mentioned contradictory objectives. The shareholders of any company
would desire increment of their share invested in the company, and at the same, they are
also interested in the expansion of the company they have invested in.
 Tensions between managers, shareholders and debt providers- The interest of all the
three groups has to be kept in mind while formulating corporate strategies. Managers
want increased remuneration of investing their skill in the company (Rivera, Muñoz and
Moneva, 2017). Shareholders want maximization of their wealth and debt providers
desire increased interest on their amount. All the three objectives have to be managed by
effective financial management.
Alternative sources of finance

Debt Equity
This can prove beneficial for the company
when the major objective is to pursue growth
and expansion especially when the amount
can be acquired at low-interest rates. The
major drawback which accounts for the
company with the debt capital is that it is
mandatory to pay interest even if the company
incurs losses.
This source is beneficial for the company
when they need sustained investment in
business and return on investment to
shareholders is not mandatory for the
company (Wang and Sarkis, 2013). The
drawback of this source of finance is that the
shareholders get a stake in the management of
the company which can dilute the powers.
Debt can be beneficial from the investor point
of view in a way that they are secured sources
(Tantalo and Priem, 2016). The drawback is
that the debt holders do not get a stake in
management.
Equity is an unsecured and hence risky form
of investment, however, the stake in
management comes only with equity
investment.
The cost of raising such form of finance is
much lower to the equity.
This is an expensive source of raising finance
in the form of formalities to be fulfilled
before raising equity.
Operating and financial leverage and the opportunities, dangers of different levels of gearing
Particular 2016
Operating Leverage 2.60
Financial leverage 1.066
Risk of gearing Advantage of gearing

 The decrease in value of
Investments.
 Support in taking profitable projects.
 Borrowing is cheap option in comparison to
other such as issue of share
 Interest rate increases
Role of Treasury Management
The key role of treasury management is planning and controlling of cash assets to achieve
an appropriate finance mix by appropriate
 corporate financial planning,
 working capital management,
 Funding management
 Currency management
 Finance management.
Risk management by Treasury manager
The risks associated with the management of finance are fluctuating exchange rates and
interest rates and prices. Risk management is done by treasury management by transferring risks
by applying hedging techniques that are compatible with the internal policies of the organization.
Treasury Managers use techniques like Options, futures and swap to hedge their risks.
Alternative working capital policies and dangers of liquidity issues

Figure 4: Working Capital Policies
Each of the above-listed policy has their own liquidity issues depending upon the level of
working capital required by the organization. Liquidity issues can pose some serious issues to
the company by posing a hindrance to daily operations (Working capital management, 2017). On
the other hand, excess working capital may not ensure appropriate use of finance.
Part 6 Capital Investment Techniques
PROFIT CASH
Profit can be termed as the revenue which a
company earns from its sales (Capital
Investment Appraisal, 2017).
Cash is the main source of survival of the
business. It includes cans in hand and cash at
the bank. Cash may not necessarily profit and
profit may not be necessary for cash (Berry,
2017).
Profit plays a major role in long-term
investment decision, as the greater the profit
greater will be the investment in expansion.
The availability of cash decides the
investment decisions of any company.
Accounting rate of return, payback and net present value of an investment proposal

Microsoft has decided to buy all output from 110 MW wind farm for a period of 20 years.
An investment of approx $1 billion has been made by the company. It has been expected that the
amount will be recovered in a period of 20 years. The payback period is 20 years.As it is part of
emerging market higher rate of return is expected from the investment.
Investment appraisal techniques
Figure 5: Appraisal Investment techniques
Elements of capital
The two important elements of capital that are the equity and debt have been explained in
detail under alternative sources of finance. As far as preference share capital is concerned, it can
be said as a balance between the debt and equity and contains features of both. The company has
to pay a necessary return on these shares also they have a stake in management, with utmost
security at the time of dissolution.
Weighted Average Cost of Capital
10.17% (Appendix 3) (Microsoft Corp (NAS:MSFT) WACC Microsoft Corp MSFT, 2017)

The benefits and limitations of the different approaches for computation of the cost of capital
Model Advantages Disadvantages
CAPM  Measures risk and
return on investment
after considering
market risk
 Complex model
Discounted cash flow
approach
 Highly useful tool for
calculating the net
present value.
 Uncertain, since these
relate to future cash
flows.
Bond Yield Plus Risk
Premium
 Suitable for
calculating company’s
value.
 Time-consuming.
Strategic investment opportunities
 Strategic fit- Gaining an understanding of the organization’s environment is one of the
prime purposes of strategic analysis. The core competencies of the firm lay in its
innovation strength in the field of IT.
 Acceptability and feasibility- The scale of investment needs to be achievable in terms of
resources. This requires identification of options with a continuous process of planning
implementation (Van Dooren, Bouckaert and Halligan, 2015). The stakeholder
expectation and strategic capability of Microsoft are in favour of its investment in new
launch of windows.
Quantitative and qualitative issues of strategic proposals

Figure 6: qualitative and quantitative issues of strategic performance
Part 7- International Financial Market
 Role- IFIs are an important to form of project financing in the company as they support
large-scale IT projects in emerging markets. They can provide capital and catalyze the
contribution of other players (Andromeda Simulations International, 2017).
 Financial risk- the major financial risk associated with IFIs is the rate of exchange which
is never constant and poses difficulty in accounting.
Approaches to managing risk and complexities of capital budgeting

Figure 7: Approaches to managing risk
Evaluation of forward rates and capital project
The forward rate of the share price of Microsoft as on 13th Oct 2017 is $23.9. (Microsoft
Corp MSFT. Forward rate, 2017). Presently the company has invested in international patents
and also in other international investment. In case of an international project, it is necessary to
assess forward rate and exposure relating to same. The reason behind same is that higher risk
exists in this transaction and same affect significantly on the profit of business (Annual Report
Microsoft, 2017). Thus, the decision should be prudency so that negative effects relating to same
can be mitigated.
Indirect benefits of International Financing

Figure 8: Indirect benefits of International Finance
Internal and External Sources of Finance

Figure 9: various sources of finance
Eurocurrency market
 An external banking system that works simultaneously with domestic banking.
 The transactions of this bank are an interbank transaction of more than 1000000.
 Works as a normal bank by providing loans and seeking deposits at an agreed interbank
rates.
Part 8- Types and Sources of Risk

Figure 10: Types of Risk for the Company
Degree of Organizational control
The company exercises strategic control, by the strong informational support provided by
management accounting. This assists the company is gaining competitive advantage and strategic
position through filling the gaps within the need and availability (Tantalo and Priem, 2016). By
providing competitive information, management accounting facilitates organizational control.
Additional risks associated with international Operation and their management
The additional risks associated with international operations apart from financial risk are
 Political risk
 Economic risk
 Legal Risk
 Transaction risk

These risks can be managed by a thorough understanding of the situations existing in the
international market and then formulate strategies.
Risk map and surveys
Figure 11: Risk map for resolving issues
Contingency plans for dealing with potential risk
Cloud-based services and market relating to device and software is highly competitive.
Derivative instruments have been applied to organize risk issues relating to foreign currencies,
equity, interest rates and for facilitating diversified portfolios (Wolf, 2014). Further, broad-based
commodity exposures have been applied by the company for enhancing the return and assessing
diversification. Moreover, these indices are applied to manage economic risk relating to rate of
return
Techniques to manage risk

Risk Management Report
Need
Formal risk management can be specified as a necessity for a company like Microsoft;
where a lot of international transactions are involved, and investment has been made to. Through
assessing this report company will be able to assess the extent of existing risk and the manner
which same should be dealt.
Emphasis on sensitivity and its impact
Risk management report assesses the sensitivity of major variants such as interest rate,
share price etc. Further after analyzing the same emphasis is made on such variants so that it can
be beneficial for the company through modifying the manner of business operations.
Analysis of management of risk
The company is exposed to economic risk from the interest rate, equity prices,
commodity prices and credit risk. Foreign currency exposure is assessed on a daily basis and
hedging is applied to the possible extent in order to mitigate the risk (Tantalo and Priem, 2016).
Credit risk is managed through forwarding purchase commitments of mortgage-backed assets in
order to gain exposure relating to agency mortgage-backed securities.

Appendix 1
(Amount in $ million)
Year 2016 2015
Liquidity Ratios
Working Capital Ratio 139660/59357 122797/49647
(Current Assets/ Current
Liabilities) 2.35 2.47
Inventory turnover 85320/2251 93580/2902
(Net Sales/ Closing Inventory) 37.90 32.25
Efficiency Ratio 2016 2015
Profit Margin 15813/85320 11007/93580
(Profit / Sales) 0.19 0.12
Asset Turnover Ratio 85320/193694 93580/174472
(Net Sales / Total Assets) 2.51 0.54
Financing Ratio 2016 2015
Debt to Equity Ratio (121697-59357)/71997 (94389 -49647)/80083
(Debt / Equity) 0.87 0.56
Interest Coverage 20182/ 1243 18161/ 781
(EBIT/ Interest Expenses) 16.24 23.25
Other Ratios 2016 2015
Gearing ratio
(121697-59357)/(193694-
59357)*100 (94389-49647)/(174472-49647)*100
(Long term liability /
Capital employed *100) 46.41 35.84

Dividend declared per
share $1.44 $1.24
Appendix 2
Operating and Financial leverage ratio:
Particular 2016
Operating Leverage 52540/20182
(Contribution Margin / EBIT) 2.60
Financial leverage 20182/(20182-1243)
(EBIT / (EBIT - Interest)) 1.066
Appendix 3
Weighted Average cost of capital = Equity / (Equity + Debt)* Cost of Equity + D / (Equity +
Debt) * Cost of Debt 8 (1- tax rate)
= Weight of equity = E / (E + D) = 596846.886 / (596846.886 + 69827.5) = 0.8953
= Weight of debt = D / (E + D) = 69827.5 / (596846.886} + 69827.5) = 0.1047
= 0.8953 *11.03 %+.01047*3.1821% * (1-11.675%)
=10.17%

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