Page 320 - Corporate Finance PDF Final new link

320 Corporate Finance BRILLIANT’S

‘mZm {H$ g§ñWm 50% Xa na Q>¡³g H$m ^wJVmZ H$aVr h¡, {ZåZ{b{IV pñW{V¶m| ‘| H¡${nQ>b H$s H$m°ñQ> Q>¡³g Ho$
níMmV² JUZm H$s{OE…
(a) EQ> nma ~oMo J¶o 14.5% {à’$a|g eo¶a&
(b) EQ> nma ~oMo J¶o nno©MwAb ~m§S>, Hy$nZ aoQ> 13.5% h¡&>
(c) ` 950 na ~oMo J¶o Xg df© 8% ` 1,000 à{V ~m§S>&
(d) ` 120 Ho$ ~mOma ‘yë¶ na EH$ H$m°‘Z eo¶a ~oMm J¶m h¡ VWm ` 9 à{V eo¶a H$m H$a§Q> {S>{dS>|S> ^wJVmZ {H$¶m
J¶m h¡& 8% H$s Xa na d¥{Õ H$s ³¶m Anojm h¡&
Solution:

D 14.5
(a) K =  100   100 = 14.5%
P NP 100
(Note: For calculating cost of preference shares, tax rate is not considered because it is always
after tax).
(b) K = K (1 – t)
d i
I 13.5
100 


100 = 13.5%
K = NPP
i NP 100
K = 0.135 (1 – 0.5) = 0.135 × 0.5 = 0.0675 or 6.75%
d
RV NP   1000 950 



 I 1 t  80 1 0.5   

n  100   10   100 40 5
(c) K = RV NP  1000 950  =  100


d   975
   
 2   2 
= 0.0462 × 100 = 4.62%
D i 9
(d) K =  g   0.08 = 0.075 + 0.08 = 0.155 or 15.5%
e P o 120
Illustration 4.1.18
Chirag Ltd. has its shares of ` 10 each quoted on the stock exchange, the current price per
share is ` 24. The gross dividends per share over the last four years have been ` 1.20, ` 1.32, ` 1.45
and ` 1.60. Calculate the cost of equity shares.
{MamJ {b{‘Q>oS> Ho$ nmg ñQ>m°H$ E³gM|O ‘| H$moQ> {H$¶o J¶o BgHo$ ` 10 à{V Ho$ eo¶g© h¢, à{V eo¶a dV©‘mZ ‘yë¶
` 24 h¡& {nN>bo Mma dfm] ‘| à{V eo¶a J«m°g {S>{dS>|S²>g ` 1.20, ` 1.32, ` 1.45 VWm ` 1.60 ahm h¡& Bp³dQ>r eo¶g©
H$s bmJV H$s JUZm H$s{OE&

Solution:
Calculation of Growth Rate: If we observe the dividend over the last 4 years, the dividend
per share increased from ` 1.20 to ` 1.32. The percentage change in dividend may be calculated as
under: