Capital structure of a company includes the following: (i) Equity share capital: 6,00,000 shares of face
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Capital structure of a company includes the following:
(i) Equity share capital: 6,00,000 shares of face value ₹10 each
(ii) Preference shares capital: 20,000, 14% shares of face value ₹100 each
(iii) Debt of ₹20,00,000 bearing a coupon rate of 14%
During the year, the company earned EAT of ₹25,60,000. The equity capitalization rate for this risk category of the company is 25% and the returns expected by preference shareholders are 17.50%, whereas return expected by debt holders are 14%. Calculate the value of company.
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