Priyanka Corporation has financial structure of 30% debt and 70% equity. The company is considering various investment proposals costing less than ₹30 lakh. The corporation does not want to disturb its present capital st
CS Professional · Financial, Treasury and Forex Management · PYQS · June 2014
Priyanka Corporation has financial structure of 30% debt and 70% equity. The company is considering various investment proposals costing less than ₹30 lakh. The corporation does not want to disturb its present capital structure. The cost of raising the debt and equity are as follows: Project Cost Cost of debt Cost of equity Upto ₹5 lakh 9% 13% Above ₹5 lakh and upto ₹20 lakh 10% 14% Above ₹20 lakh and upto ₹40 lakh 11% 15% If tax rate is 30%, you are required to calculate the cost of capital of two Projects A and B whose funds requirements are ₹8 lakh and ₹21 lakh respectively.
Topics: Capital Budgeting
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