We have outstanding 100000 equity of 10 each. For expansion
of business we need Rs.500000. which of the following option
will be beneficial for equity shareholders ? If net profit
before interest & tax is 300000 &tax rate is 40%.(1)-50000
equity sh of Rs 10 each,(2)-10% Pref Sh.. Rs 100 each,(3)-
5000 10% debentures.??????????
- 4 Answers
- 6646 Views
- Genpact, Management, I also Faced
- E-Mail Answers
Answer Posted / jagdish
(2)
Profit-300000
less-inter-2000
EBIT-280000
LESS-112000
PAT-168000
(1)PROFIT-300000
TAX-120000
PAT-180000
| Is This Answer Correct ? | 3 Yes | 1 No |
Post New Answer View All Answers
Hiii, i have done mba finance after doing b.tech biotech. I am now facing many problems in interview as yhey are asking about my biotech back ground and secondly the questions posed by the interviwers consist of core finance and i can't answer as in mba they teach about each subject superficially? What must i do now?
Why Nominee is important to open any A/c in Banks?
What is the old name of syndicate bank?
What Is Capital Gain? Explain Long Term Capital Gains And How Is It Different From Short Term Capital Gains?
Read the case given below and answer the questions given at the end. Krutika Designers Ltd is an Indian company engaged in designing shirts for an international shirt manufacturer. Its operations are currently restricted to designing shirts for the Indian market. The firm is interested in extending its operations to the European markets, but is restricted by its lack of knowledge about the latest fashions and trends prevailing there. Hence, the firm has decided to open an office in Finland for establishing a network in Europe that will give the firm access to the needed information. The firm feels that its does not have the capability of sustaining itself in the foreign markets in the long-term, and will be able to generate additional revenue from these activities only for the next 5 years. After that, the Finnish office will have to be closed down. The firm anticipates an initial investment of Rs.14 million. The project is expected to generate the following cash flows over the 5 years period. Year Cash flow (Finnish Marks) 1 2 3 4 5 10,00,000 20,00,000 50,00,000 50,00,000 30,00,000 These cash flows are expressed in terms of today’s money. The firm can claim depreciation in India according to the Straight Line Method. The salvage value from the project is expected to be nil. The Finnish Government does not provide any incentives for foreign investments. However, currently it is making an attempt to have better economic ties with India. Hence, it has decided to extend a loan of 50,000 marks to Krutika Designers. The loan will be at a concessional interest rate of 7%. The loan is to be repaid in 5 equal annual installments which will include the interest payments. The project will generate additional borrowing capacity of Rs.5 million for the firm. However, as the firm does not have any firm contract with the international shirt manufacturer, its domestic revenues are expected to be very volatile. Therefore, there is no surely that the firm will be able to absorb the tax benefits arising out of depreciation and additional borrowing capacity. The firm does not intend to indulge in any illegal money transfers. The current spot rate for the Finnish Mark is Rs.7.25/FM. The inflation rates in India and Finland for the next 5 years are expected to be 8% and 3% respectively. The exchange rate is expected to move in tandem with the inflation rates. Indian tax rate is 35% while Finnish tax rate is 40%. India and Finland have entered into a tax treaty whereby the earnings of the residents of one country are taxable in that country only. In India, the nominal risk-free interest rate is 11%. The same is 6% in Finland. The Indian nominal interest rate (including risk-premium) is 15%, while that in Finland is 9%. The nominal all-equity rate in India is 18%. 1. Comment on the financial viability of the project. 2. What are the different circumstances in which nominal all-equity discount rate and real all equity discount rate should be used for discounting the cash flows? Explain the rationale behind it. 3. Comment on the financial viability of the project if the firm is sure about being able to absorb the tax benefits arising out of depreciation and increased borrowing capacity. 4. Explain the concept of exchange risk and how it affects an international project. 5. How can the financial structure of a project be used to overcome repatriation restrictions? What are the additional benefits of such maneuvers?
What is the Largest Public sector bank of India?
What are the different types of taxes imposed by the government?
What are treasury bills?
What are term loans? What are the features of term loans?
Give some examples of RRBs.
What is Cheque Discount?
What are SMEs? What is their role?
What are the limitations that should be known before trading?
What Is The Difference Between Bombay Stock Exchange And National Stock Exchange?
Where were Olympics held in 2016 and now when will they take place and where?
