1) Debi tu deim capital stuuctuw . Do you peak cthedt Gupited Atwudune hos any xolovernce, fox the corporates tn the Coston economic Acenaseio 2 How tee fume rmcuy jimbo ur their profitability and value. usitte the help Bh O Suitable. Copitat | Stauthute @ Cubbout Your answer. sith Suitable coxporae cata, [Gpitel stsuiche suelo te the nix of db ancl equity in the aunds employed oy @ finm jou. ib business speration anol | | oth \imancing- nook. A finm's copital stawcrune i bypically | ere 4 a debt-to- equity Hotio. | Debk and epsly capited eee used Je und lousines Gher ations , capital exponditwus , acquisition, and othwe investments sutdtid expercitwus. Fim nase te make trodes usbile daudiny om | whither t wie debt oy equity te fjnone. He operations . nono managers howe dd loolune. te hw in oder & find an optimal capited stsuctmre fpr the pom. Relevance of Cabited sbuichue in cuwvunt econsmic Scenasito: | With tue ongeing, Gvid- 19 pandemic and ouonty 4, Jockdowons , ta Tndion ersmomy u's Qeebpling usith a Shaxp suducton in conor ackiviby. Busrumer oe expect Je face comsidonable Aigua dit Challenges amiclst Concesnd 84 a usrdke demand oer coming, qmontu. Tn cuch Hines oh Ctisis , comparties need te tps om the imger- tom sbnokgit Slej¢cHves 6, fhe purines. Yek with Unareteinbier stoma ing. Sug She 2usnowil yucrvery as well os ty Umaabusk oa dhiand wave Of the pandanuc , financial agility sumains Liisi Je bring more piuoactive , and even epporkunistic . Fo moar sectort, ushile neimfoxcing. tte foolanasheds and portiot mangers acquisitions fox ding this, gE u Curdod for tu +iHms | they uh enture amour tfbicitw use of cofital and o sethirde| Oh the Log ctesnn cuitad tbxuchine, . Thiz involves 0 furdenertal axeamunt of mdobledrx and Jong--toun Aiquidtky neecle , usbich Aboud jndude a detailed and ingorneed anoly eis o tupiking- capital Suguicemonts , pumenud , aciuisition 2 disposals , all a thom deugeted to gemoeati the propa Cipital ctuchue, towing On optimal capital struc in Sudh o csuisis Hme wotenly cud ty puancial Hotline. of the busines but alto gine way to a susttuinable. future gieowth at, the damn im tesme o4, iproptecbility and jouines operations. How fst can _jreback puohitedbitety & value. throygh capital shurchue Gpital gruckw & tle Yn con haw significant jmpock on loath Rv profitalaibity and ats valu, Havigy, more debb capital can aby | tu Yropitabiliny oritively oi Uk allows frm to leuenage existing. | pn tuuby enabling mone xopid expanion than cthuxoie wold Ye loan possible. The effective use by delet Sirancing Sturul}s ‘in an moe in suverue thar exceeeli Hu experue % interest Payments Addiviorally , fu interest peymants are Jourclecucible , seducingy the firm's eyexall tow busden , posumount. The fou rect > Abipt pe being. onckive Be the, {@).@. [The impact of equity Prsurcing. on a compomy’s pregik maging nae dmpotadt at ak Gun Llirulat: gteeusth usithour suqusing {te Hopaymort. Rub, at sharghotders ane Qpented Limited cxonetlip | | wigua 1 mdlucling veling sughds , 1 they ale expec o Sedu on | hei jmuertwont Go the jew dividends poud dy te even Bh preps. A busine funded by sharshelder equity owes to itt invettou and yuh stomain prepieable. in pider b> publ tis obligatim, Anotlur indised” cbhedk % cofital Abuchwa, om foveal impact on Hu petenhal Avouleliliy 4 additional coyeital iit in| aided Jn gehvre, . A company usith @ particularly high olebt ty Ayuity atio many be deen au urmecoscariby otisky ky beth fends jand potent choulstdou , 1 rraoking ot dipiculh to raise ad iorad, | perdi. Lieuted acces J capital funding in fun, Limi the pusinws 5 growth potuntiol | keeping propit margins stegrant. | wwhun we cma tdy byom volt, Gk Ju dafpiched ley ennniige of thy fiom Idea directly dabend gn ats imvetnnt decision . Value ate pen | is debendant on tv impotent facto , he) Hu opesating foropits | (eee) of tha fiw ond ih coat g Coppel (wace). ie opesatig, | prot us divided tue stukebstlore : | U1). Thy debt Instlers (im Hu form of interes) | (i), la government Cin the form of foxes). | (ii), The ghaulestcline (ar dividensl bom stetiduol ) | “Tu mestment docicimt oh te fom rendre tee pg dite e@rT) collection while tu Upited shuctwu cloterminer the vooa if ta wed,Value & cri fim ia the Aummation of ity valu. te He debthotden ond fm ot shoubelden, and con be satimeited oy amound op eBiT Fe going de thute fun statiotlon. The value of, pian can la muuased by moueteing. the anon of- EBIT Husugh 4 poudonk imwetment elacigion and tee value can loo dackeuted whe Capital Mpuuchure mix jooret Cartan stk. Heree , the puscnings Qvoilable fot He ctatahstdem Jn te form a, EBTT con ditectly be inplasnted, by cueital structure, a4 the psc , On dhe ctlux hanck , an eblimal cupid Abruthure, can Soise the Nelum of, Eovming. pr shou (ers) for a given level 64 EBIT. Se EPS hag the diac commecHon vith Hu market value of, tle Shue and hence. con abeck Value of, The firm . WAC. depends Ubm the proportion of difpert scurce 4, funds Jn capital stiuchte and ak can je Changeol lay changing tye fpreportion of Hrancins dx, | So, 0 qm con eoxily dhange cits WAC. Joy changing tue cofoitenk ox, and thus Abert the Value of, The flvm | [Finally Gt cam be. Aaid, that Hu value of the fim + cost | je), pital hove vugative sulation usith each otter. Th cost of caeital wo witlun cmbrol Lindke ak 0 given dowel, Oh canning the value 44, yarn con be. imouated « Theser tou, fiwone arm Lich fe optimal copitol strudur, voli uu attained cwly urten the | dol and equity Mine to joduce. the cost 6, Capital and enhance, (fhe You's parbtabilty “The managenant of tu fon ikea bus to jack ptr cofited Abus [n away te moxinize ‘tulle pis vobaL , and uA decision Us ptosbly important (4).Modiction’ am Mill Medel shes clomerutentiol tu inrcheone oh copital gbuucue. in dicioli fim vole , abthoyt the cusumbtion UY valuabl oaly jn purfect marked conditions Howes! Meal marker umdibory are fer pus peuect, and thut dient Theories came up over Hme te determine optimal cofitel mix avd GM Hole. in othe fivm's value. A gio yeu afta the iwrelevance theory , Meciglians + Mill Heviieel the condition ound oxplainad thet Inbeutl exfeutes cre tan cleductible , crn , the value of the Bm Atould Anownre sith 4 lughor debt sao. TH Cpe setlion We con See Hytough Some coyoratt cumbl , thelr leverage as guod fer fomfits Ute 4 Cenk | lol | bout very high oebt redueu propiteleality Meo, | there connet ke a specific DJ ratio ber He firme aa Qifpunt finns tanger diypeunk coupited Steuchae based | tn HuiA budiurt ofnation ara potion in ty market, Some compari way prep & Uo dle usbik othid ynouy aenage high Dje ber Mr rsoutiny then net worth. 6)6) 7 Coxporat. Cums +> Explain low capital Th cate ot Asahi Gla > we can ge why ty terage fabio Qe moreatesl, ik impos Yaritinely Hu popit uble 4 cardi level, Age. tat pein | Ho tinm Stark fo haw lowe due high bub 4 adebt. > Same tren! com be Geon ter SAIL aloo, op te debt csvnprent in overall cooaited struc \morenset , tb males Hy ism fae Kpscea . Atty Sucopitolization, tu DIE relic gets etclutod anal Yer have dants making prH again 2 Tn case @ TTC, ey Heough i hou Wary devo DIC ratio , Yet tue form makes huge forotite . Thuis to dat to cigmalling effect ua moku “infor mation te the market that diem cis in a Gel finumatd position anol ha positive abet on ts shor Volt os well ov ynonket vole| 16. Q2 82 [Beth chs seclevaince of Cost of, capital in evaluating the raw | investment propocal. How the cart oh capitol fer dibbenene Components of WACC ty worked abt Further dirs seolationship Cost SH Capital and Requined ali of nebwin txperttec by the invettous. | Relevance. wh Cost of capital fox Investment: decisions 2 | Fox any Csmbany, tic. cect of copied is the minimum sole spretan| [tak Hee. conan yuk eon on db invutments tb rect the | | expectations & ul muesbst . The concopt 4 ust af Cupital bey a | | key gale in the decision- maleing process While Conbicuing. any | | Inwethment pieposal . Gr gruatly influenced yosdout decision releded | the frenciol Aenerage, Capital sruchus , dividend potiyy, wo deing | capital management and Gyppsccvicod Sy financed portormance, The | yulrvance. of cost of capited in thuse elements canbe expliined at Jolla 2- | U_Rovinigation of the Business Value z Fox morbvdgution of ftw Value, Ha. aveuage cette} Capital hat bo | be Kept minimum . This is done ly having. o juckictoue waix 64, debt & gully im the capital shu chine & the tinm co that Yu busines | dow nat have. fo bev undus financial ssh . | (2). Decisions Holatedl Lf» Gobitel Budgeting ¢ | [the Cott oh capital Pls hey soln im Saking, cata) bucetingg | dlacisiou . Ur 2s the discount aati thar is uted f evaluate the | esinalbility of) an investment pasjec. Dy the Internal Rati 4 Rebun meted, he project will be acceptect f uk has Tee grusttin, than the cost eh capita). fcthey, NPV OL Hu txpectecl future cath tlows pom the. prec: ua tibimateel using the cat eh abil of chicomtigy sate - |Trouper, thu cet 6) Capital aul os a faenchmork, bm allo costing. Zw fim available fumcle in an optimal voy for Invertmunt. hots why ik wale yebrud te at eub-oh mote, hurclle note , wivimum Haquiked route Oh Hakunn ete, (2)- Working Capital Management: fou. ths management: 4 warding Gopited | lu cost eh Copied com Wp in timating tha cosh of, Geuying: Invest jn receivables avd Go evaluat abteanative. pelicie - Tcon alro be wed in inventory managentent. (u). Dividend Decision: | qe Vvidanad pouey ep a fim a gumraly formule dopending- on tes natu & Hu fiam muheth dk iia Groecth fim | normal form ox dadining firm. for brewing Mu nal op the fim 1 the Ineanod dale 1 setunn Os Compared ageuinast Hu cont 3 capital, ty vee urbtlun Hu intemal Rol Of dtebyun cu qesollia. then , equal te or ls thon Hae Cost of, copied » utvch indica the notin | te Yam as the gowth bem | orimal fmm or @ duclining. | | fim Fi surpectively , (5). Detomination 4, fatal stuuchus: Wile da deling He epti num coupitert Abu, + Te pin , dire! impertonce, Gu given ds te wefyted average cost 94 capited . The | Sriective Wine seamalnh te choose, euch = mdm of, dat and equily So hak the Sumrall Cort +4 apie) is minimized. | | | | (4).(6). Evaluating Finoncal Peskormance. 0}, Trvectmrent Poupieck : Te cone “a, corr a, pir Wi abba week J. queluct the. tvancial porpamanc. op the meping / no prope. This ie dime by Conpouting du actual proptabilty oh the investment prick | with tu wurall ost Oh Capital of athe frm. [Combone ents © Cost 64 Capito: [os oh Cofste a mucuursch for differ dourced of capital ruckus re fin. Dr includes Cok o}, Aslot component, Cost 6 fpreefersnce _Calaital Comporunt ond cost 4, equity chore coyited. '(). (ou op Debt | Te tis ote yield te rmobwrtiy 6) tu clebr instsuument such on debentims, lowk loan and commercial paper . * Cos 9 Debentwur ib the value. of thy sh te following | equation ; which can be. caleulotid Joy brial-ond ner rattled on Hurough opprominatn - formula given below = £ : | f = Cire * ear | 0.6 f + OW F whet, Pe the Cuuudl marke pulce of dobeutue, Liste annuol indore pouymont, vw ds maturity yeau, Fis “thejper value. | | ~ Gott oh Bonk loan L simply a choxge ip the thm wee tp Moise a Similar, loan now . + to Commerciol Paper Ga fu implicit Weheret stati.0 fam uu digherent doutseumenh oh dale, Then overall ee Catt sh dabt us te be cadowlotisl on fhe bowis the accord. ar aase mimmpmmmaiensiel alee Futter os intial om dubt us faw clidudible | the cotk 4 duet | jus ajused. for fom factor taofou. Imeotporuting iE cin th owrall | Cot 8, Gibitol. This i dene cu tollerac + | & Pat-tox Coto dubt = Purlox wit debb » (1-towrt) (2). Lost Ob Pruferance cabibal? | Pratprance Copited hor o fred sate o, dividend. ond is sedamadbl, | in none. The pyeperencr dividend vis, however, not tx daductible| Henee , Gti wos ua a equal do i yield . This can bee Colewlatidl prom ctu aporimale yield formula at used in debenture, (3). Cost 4 Equity Cuplted > equity {fran cam be either in Hu form of Retained aornings | Shrough Tne of additional equity . The Cost of equity, im beth the | qua ds some. Reteineoh gonnings include oy Opportunity ws wh wed by tu fin. while. tu cost 6) debt and prefprunce cain be calculated pray eosily, Hr cost of equiby in ciffioult- te osimate This ty becasue de jeth hak Hare wi me dafiniti commitment on poate, dhe +m Jo fory cliividends . Hower, there ard various medlrocls empbyed te get a summoble estimoLe Of “the cost of equity . ).> CAPM Ppproach + | PS pur lopital Pek Peiingr ntodel CCAP) ebitrrm dy , fhe requrret) sutwin on equity | He dt He = Ry + Be (E (ey) -R+) - ushow Re ub Sisk pore pate, us lade of equity , 4 E CRm) us expectecl paturn m market portfolio. 2 ECRm)-Ry Ww the marker pute Premium . Fox dalardning The absw inpub | tute ci jo jpecapinedl wmettrod . Howewer , Aenerelly followed jermckice include : be Rye ds taken as yidd om Jung -team govern ment: bord | Cusith maturity, o 1D yea ov mor). Le Markel Hk premium os ehimated as the dibproone latte coi Set eh morkel pottfolin £ auroge | seek pee sti over pour lo-Is yous. | Ly Pe can ft. collelatad orm Magiuation bebwein mut | | Aloe stant awd ramthhy sedan ber market indus for | | pow 60 mothe or you , | | | | | 2 Bend Yield Approach 3 This jaa subjective @pfrrooch usheat. 0 judgumontal sik peu Js odd to the abe cbicxved yield on the dors -_kum Lords 3h finm th get the cost of equity . | Cost of Equity = yield om Lng team bend + Risk foemium , Thu sulle premium us dobermined aeajr ody by the analy chs Asdhing at tia es and finsmciol suisls 4 The fim ,| | > Bividencl Growth Model Arplroach : Ths Js ebro called the Goxclm Mode . Accocling te sinis model, price. oh on olan ato depends on the dividencls exlpected pana. D fo = ode | “Zk dlividerola quow ok a Hote oh) G' peryear , then pm = be 2 DE E ee ne Be og ne BOD) Fhe Pa the cumaent pre of the check 1 Pe Hy dividend | expected ak the endel year ard # the, aq uisut rote o Stun for Ku equity shor hotden.. Hence, Hie expectect suhonn 64, shorthotdind Us equal ite He dividend yidd plus the expected growth sot . > Eosmings Cui. Rolio Peproach + Gn thin onattad , cost of equiti, uid calculated an Ee. whe. 2, 1 te Couning pu char fer the rut year £ Be ib He cnt monkel price per Shoe . Using Se above. components, the eyrcll cosh ef capitel ut estimated oy giving the. crm porents difuwnt weights as per the. proportion Oh individuol source. e4 finance In the overall | copied atauchure. Tn giving Hake voeights , gerevally target | Caste) stouuctwre id uel duteod. of exicting ene . Beaute , ib i belitved| Uhot he cured Gpited shut may nol sufloct the ime expe ted (9).| (OL Pouned te prevail tn padre Thus , WACC can be dtewmined | pos these. mponents usbidh us commenly used by the finns Le ae The wet 4, capitol fer Ahoy jmveshments . | Fiotthest, in caleulating weighl fox fangel capital suwctuns, ln ork value 4 moder voline. con bbe uted. Book value. wojhis ore ‘eat SS coloudabt , ave seenlily available. fey eve cornpary anal | GL Jpiuly cloble . However, Linance Adrlard strcermmoncl, the we of | york yale. useigtds unless morket values axe vst available a highly unifable, Thay loiewe thak marker vedues are. super te the. book, vals leecouate. © Components s4 WAC. sepreuent te | | eppoutuniy coste thar Hubtok the cunent maxkel condition . D, | joedon fo pally the valuation , the fiym mut ewin competitive etwink on tee cpveenl” vali 6) the innertments . | AYEA baving costi ob various fineuncing Asuncet and their [ruspeckie, WACC. ie caloulatcsd lay multiplying the specltic, cast 0} each sown. with KS proportion in capital structure and adding due veigided yoluos. formule toy the same Gu $s | WACC = We. Me + Wp. te + Wb (= #)| aut He Np & oy are the putbective cous of Equity | Propeernce and pre- tee debt cost CE iy the tax sete J, | 2? We ; We 4 Wy wu Suspectine Loeights of equity , penn. © debt in finms capilak shurcture .los Get 9, Opal ood Raguinasl Rabi oh esbown 3 . The Haq witeel gate of eatin (KER) aul Hu cot o} capt both Qa. tu fundamental mekstid in Hnance. and inverting. Thy all dn Acope , boupedtive, and wie 1 jut both ay then ape te Gaitilal invuttmenk douiiont fox fiemt ad well au individual — The pequirtect sate Oh sutwn 3 tue ndnimum Het an invest ill accel yor Burning the finm’'s shoe | as compenration jp specific leud oh HK amrdolid usith holding the cto. fiom we RER te anolyse tu pokentiod probjtublity, o, copited forject they undetele | The cost of Capitol ia week lay Ha finna as 0 meobnic. te judge whut @ penjtth is uth invubment and epencling the fimanciol reLeurces . [Treutont yoy use Hus mebic fe chhwmine whether an nvatment [Ha worth the suisk compard to the seetusne. | Both ob tue wabri com with Hum Hu opportunity Cost ive, | benehils that an individual investor o4 fis masses ob votile | Coorg wy alitanative over anethr. The cost 4, capitol and RaS wulsich can help marktt participants of all dypts — uyeu and | | Aelleas yt 60Ar tues thu competing altesnaki wer op uaing: | Sian qos ond Do woke uvise financial decision . lushan tee RRR us equol te the cost ep copiterd, Gk sels thestage! jro javeutable scnosuio. Fox example, a piem oti ua williy te oy \0% on i staked capil , and an mveher who neds « 107 pabrn on investment , would most Lbeby pe satis ed orang pa) &| | Thensetbicly flu sug uid odio wutwrn curl cott 6} copited pero & Giver irwertment shoud bond bowed me another - | fewer, goth option cymet usith sucks And cost , ageint which 4 fim wut weight ta seis Hotuan nutes Se make & Capikeu prefect worth wile . Kovowwing the cost oy Cofeitak Com hil tha bin to combos its options fer Saisiny | eaulh mone eouily . —_1___» —————THank You ———_. ——1— (9,