CA Inter C- 6 Cost of Capital

What is K_e (Cost of Equity) in Q 1 (i)

• 1.00 %

• 0.10 %

• 10 %

• None of these

What is K_d (Cost of Debenture) in Q 1 (i)

• 6.05 %

• 6.5 %

• 0.650 %

• None of these

What is K_p (Cost of Preference Shares) in Q 1 (i)

• 115.00 %

• 15.50 %

• 11.50 %

• None of these

What is WACC(Weighted Cost of Capital) in Q 1 (i)

• 9.28 %

• 8.29 %

• 0.928 %

• None of these

What is K_e (Cost of Equity) in Q 1 (ii)

• 0.12750 %

• 127.5 %

• 12.75 %

• None of these

What is K_d (Cost of 12 % Debenture) in Q 1 (ii)

• 6.5 %

• 7.8 %

• 0.780 %

• None of these

What is W_p (Weight of Preference Shares) in Q 1 (i)

• 0.167

• 0.146

• 11.50 %

• None of these

What is WACC(Weighted Cost of Capital) in Q 1 (ii)

• 10.32 %

• 9.28 %

• 0.928 %

• None of these

Correct cost of capital helps in the following decision making :

• Evaluation of Investment options

• Financing Decision

• Designing of optimum credit policy

• All the three

Five years ago, sona Limited issued 12 % irredeemable debentures at Rs. 103, at Rs. 3 premium to their par value of Rs. 100. The current market price of these debentures is Rs. 94. If the company pays corporate tax at a rate of 35 %, calculate its current cost of debenture capital ?

• 7.57 %

• 8.30 %

• 12 %

• None of these