Xia Incorporated, a steel manufacturing firm, was established in 1992 and went public six years later....

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Xia Incorporated, a steel manufacturing firm, was established in 1992 and went public six years later. The company has grown its operation over time and is planning to launch its biggest project since incorporation. Mr. Kim, its financial manager, is turning his head on which funding alternatives available in the market today could give the company the lowest cost of capital to fund the project. Now, compute the following options and assume the company has 18,375,000 total outstanding shares, of which 375,000 were issued as preferred and a total asset of 1.5-billion pesos. Note: NO added explanation or a special symbol is required. Straight WRITE YOUR ANSWER and round it off in two decimal places such as 88.76, 66.54, 44.32, etc. 1. Xia, Inc. opts to sell preferred shares for its par value of P200 per share. The issue is expected to pay dividends of P9.20 per share twice a year and will have a flotation cost of 5% of the par value. What will be the cost of Preferred shares? Formula: k p=d 1/(P 0-f) 2. Mr. Kim is also considering using the company's buffer fund from the Depreciation Fund. The company's Net Profit is set to be 80M this year. The ratio of the present capital structure is 35:5:50:10 for bonds, preferred, common equity and retained earnings. Compute for the Retained Earnings Breakpoint, where Mr. Kim can opt to use an amount from this fund for a minimal bank savings cost of 0.75% per annum. Formula: RE breakpoint = Addition to RE for the year/Equity fraction Xia Incorporated, a steel manufacturing firm, was established in 1992 and went public six years later. The company has grown its operation over time and is planning to launch its biggest project since incorporation. Mr. Kim, its financial manager, is turning his head on which funding alternatives available in the market today could give the company the lowest cost of capital to fund the project. Now, compute the following options and assume the company has 18,375,000 total outstanding shares, of which 375,000 were issued as preferred and a total asset of 1.5-billion pesos. Note: NO added explanation or a special symbol is required. Straight WRITE YOUR ANSWER and round it off in two decimal places such as 88.76, 66.54, 44.32, etc. 1. Xia, Inc. opts to sell preferred shares for its par value of P200 per share. The issue is expected to pay dividends of P9.20 per share twice a year and will have a flotation cost of 5% of the par value. What will be the cost of Preferred shares? Formula: k p=d 1/(P 0-f) 2. Mr. Kim is also considering using the company's buffer fund from the Depreciation Fund. The company's Net Profit is set to be 80M this year. The ratio of the present capital structure is 35:5:50:10 for bonds, preferred, common equity and retained earnings. Compute for the Retained Earnings Breakpoint, where Mr. Kim can opt to use an amount from this fund for a minimal bank savings cost of 0.75% per annum. Formula: RE breakpoint = Addition to RE for the year/Equity fraction

Answer rating: 100% (QA)

1 Cost of Preferred Shares Xia Inc is planning to sell preferred shares at their par value of P200 p... View the full answer