WorksheetsCA Inter C- 6 Cost of Capital
Total questions: 15
Worksheet time: 15mins
What is Ke (Cost of Equity) in Q 1 (i)
1.00 %
0.10 %
10 %
None of these
What is Kd (Cost of Debenture) in Q 1 (i)
6.05 %
6.5 %
0.650 %
None of these
What is Kp (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 Ke (Cost of Equity) in Q 1 (ii)
0.12750 %
127.5 %
12.75 %
None of these
What is Kd (Cost of 12 % Debenture) in Q 1 (ii)
6.5 %
7.8 %
0.780 %
None of these
What is Wp (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
A company issued 10,000, 10% Debentures of Rs. 100 each on 1.4.2020 to be matured on 1.4.2025. The company wants to know the current cost of its existing debt and the market price of the debenture is Rs. 80. Compute the cost of existing debenture assuming 35 % tax rate using NPV Method or IRR Method
Around 12.21 %
Around 14.21 %
Around 9.21 %
None of these
RBML is proposing to sell a 5 years bond of Rs. 5000 at 8 % of interest p.a. The bond amount will be amortised equally over its life. Calculate the bond’s present value for an investor if he expects a minimum rate of return of 6 % ?
Approx Rs. 5226
Approx Rs. 5263
Approx Rs. 5622
None of these
Calculate the cost of equity capital of H Ltd, whose risk free rate of return equals 10 %. The firm’s beta equals 1.75 and the return on the market portfolio equals to 15 % .
17.875 %
18.75 %
15.75 %
None of these
Cost of equity of a company is 20 %. Rate of floatation cost is 5 %. Rate of personal income tax is 30 %. Calculate cost of retain earning ?
21 %
26 %
14.7 %
13.3 %
Which of the following is not an assumption of the Capital Asset Pricing Model (CAPM)
The Capital Market is efficient
Investors lend or borrow at a risk free rate of return
Investors do not have the same expectations about the risk and return
Investor’s decisions are based on a single time period
