[Camiin[rase bate [> y~ mS e: mon EQTT EPS vyelasionghip 2 Ac % sists of the Fai 4 | ‘@ | Parssscorass sacs [Equity Smayes of R6190 each | 29 ts erqined earning 1O lakr: Vy. ne AseSs 12. airs Hh debemiwes 8 ian Total 59 lake [The ¢o-eq3mS R512. an capisal-The income +x yore ig SO/-The co--wequines aq Sum of @5:25 lakhs to alFimance expansion _pscaxormmme Fox eobich Pllawing Auer mat VeG crxye _Quailable | _ dt. Tssue of 20000 equity Shares at a premium of | IRs: 25 pey Shaxse laTSesue of (0% Pselesence Shayes: alBTssue of $7 Deb ___|T+ 16 eStirnated that P/E Ratia im +me cage of equity 7 |pucfexences and dehentuzes Financing could 6 204 1+ and 1S‘ wespectively Which of the Cavoasing | ite smative cdould you yecormmend and hy ?Sinoutd afthe co. qo Cox _expansian: —[comtnln 3] Exiguing Option 2 - Invegtment S0,00,000 |35,00,000 |35,00,000 |35.00,000_ QoL Wd V2. ious 127 ESIT 6,900,000 | 990,000 |990,900 19.90 900 LESS: Inteyect | 56.000 | 56,000] 56,000 |2,56,000 _ : Eat S.44,000 |8,44,000 |3,44,000 16,44 000 | Legs ‘Tax @ SO/. na2900 |422000 [4.22000 |322,000 | » PAT 2,42,000 |4,22.990 |4,22,000 |3,22,000 | ——_|les: Pxe® Dividend [1,08,009 [1.086090 _|3.58,000 [1,08 900 sri wailable | equity Ghaxehoidess|| 64,000 [3,14 000 84,009 12.14 O00 —____|No-cF equity Sthayes! 20,000 | 49,009 __| 20,009. 29,909 EesS go 4:85 Ba 1o4 P/E Ratt 24 es | 1S4 Moxket paxfce (64-99 S44 64-99 LEP Sx PE Ratto) » Recommendations :- (I+ 6 betes #€ cormpany go fox expansion and chose _ _loptien 2 Cow Cina neimg additional mmoney. NO5_+be oasis of EPS option 23 16 betex Blos +he basis of Maxzket pxice option 1 and 3 both Cormpmen oe Ee Blovewall apiiom 3 ig betes option to chonse- Case Qe —____ [Calculate maxsicet vate of the Cesro(uy value of the hare and ovesall cost of capitalTne niet anevating+ income ig E@IT t¢ of R5-5.00,000 and soxa\ {pve stment _ —___}R5.20,00,000 Rate of equity capita ak —__ IE Fco: uses “he? debt thes ie tg 1Oy- = J2TE the Cisen uses S7de of R514 00.000 them Ke fe II = SIF the Ctyem uses G67 de of 26-16.00 009 «obese Ke is 3 tradias of capital Sts | theasy 36 calculate Tt — Calculation of Total _wWalue of Fixen:- L IASGume that RS-14.00,000 deb+ cam be xaised at S% Bate of inteyest and Rs. os jxaised gt 3 yate of imtevest Hese Net Opexatir Paxticulass No Debt |Rs-14 60.000 Reig OO0C0 | @ s/. Q@rz. . Net oOpexcting Tncome 5.99900 1400,000 1590 c00 | CEBIT) | allegs: Tesevest Ore 49,000 | 112.090 Eayniog available to. a Shaxeholde: 5,990,000 | 430,000 |3.g89000. Equity Capitalisation Rate | \O%. Vy. Va [Masket vatue of Equity al Gases a |50.90,000 39,09,0Q1 |29.$4 615 __|masket © | os 1490,900 | 16.00 ,000 Total Value oC Fixen (50,600,000 53.09.09: |45 8461S __|Pexage cost of Capital lov. B-46% A967 — gansta cucttabie 0 shegehel a eee ger] [Total Value of Fixe 7 e = Lio: E@IT Kr9} 19% | aun [10-907 | Tetal_vaiue of Siar(Camiin] ras 1 Qecormrmmendasiong:- Option 279 ie: Rs.14,00,000 @ 57 is giving \ocwes+ WACC (ko) land highest value of five Should be selected as. Capital Siructuse: + Case 3° | hi AE. \ msi ingq_an_tovesiment tm_one of | — 9 _fobich equines cagin oustiay of 6950000 and Rs. | IS 95.000 Svely: ceytai equivalent appxoach ecisiang The cusmemt yield on Govt bonds is 67 and Project X Project Y Neaw Cast Clow CE. Cash Flow Ce ae 4 SOOO og 4 S0999 oo 2: S$.00,000 OF 4.Go,.900 o8 3 5909000 Os 500.900 OF PV digcounted Factoss a+ 6% aye tl O-943, ss = 2 0:39 J 3 9:34 Z : It-cobichs oxaject Shouts be accepted DIF RAOR rmethad 16 used cohich project cdoutd be Analyzed colts fhighes wate. _ =[Camiin[rase Dae tt = tatement Showing NPV of Pyoyect Yeav|cash | CE |Adjucied [ev Cactoy| Tora: ev Se) Lio |___Icast local @ 67 pean eet | \ [4 50.900 |0-8 |3.60,000 0-943 339 480 = 2__|S00,000]°F |3.50,000 | 0-89 3.\\.500 = 3 |So0,000/0'5] 250,000 | 0-34 210,000 S Total Pv of cash imClaca 360,980 Tnitial Tnveatrment 3.50,900 d npy (0.80 : > = Statement ing NPV of Pxoyect VY | Yeos| Cash |CE | Adjusted lev Ractor | Total py aI Eloas Cagh ctocs |@ 67 = |_| Iysoooo loa] to5.q00_ | 9.943 3er.ais all 2 __|4. 50,990 /0:813 60.000 0:99, 3.20 4oo ee 3 _15,.90,.090/04]3,50,.000 0-84 234.900 | 1 “Total PV of cash fnfioes 996315 | = Anitiat Thovegtrnent 8.25.000 | a Nev LA 316 I Recororpendaiions- > T - MSince tre nipy of Project Vt prayect Y Shad be accepted —____|@Since the certainty equi + __coefficter, oF Project = Xis_tosnes than Pxoject Y-The pyayect x t6 sieves ——__than__Pxoject Y-Thexefoxe if Rigu adyusted di count | —_|tiate_rmethod ts used the pxoiect ¥ conuid bh alOnaly sed eoithy a riqhes ga a | INiqhe St hence the,——_4YZ_\td- thaG _a_4o4a\ capitalization of @s-10 lavas | It is planning ta aise additional Cumds of &s°S | ———_ aks Cox _implecnemting capital budgeting proyect-_] ———_}Entise equity Smaxe by issue of Shaxes: L [Camiin] Dae (Case 4 Sonsisting emsinely of equity capital &siO pes Shave. | flinewe ase tengo _alreymasives available +o carmpany, | xflne co. 3S tm the tax byacket Sov. Calculate imaiffesence point Plan 1(@6) Plan 2(Qs) Equity Shaye Capital 15.00.9000 19.00.0009 _| Debt 8 500,900 || _@ [Moora £eS undex Second aud | X- 50,000) (\- 0:50)/1a,000 = ¥ (1-9-0) /15,400 e+ x lev L ets Ees col be Same. [EPG urdexy Civs+ arteymarive ~ X%U-t)-P = X (1-0'S0) | al N. 15,090 OH Hs | BMA ve | (x- Bes) U-t)-P5 = (X-50,000) (1-0-50) L No 19,009 N: 2 24 7s '5,000 /19,000 (X-50,000)( 1-059) = X C1-0-S0) 1:5 (X- $9,000)(G-59)__ = X ~9- 50x riba ae 4.5% - 0:5 > 34,500 t:-5Co-SOx - 25000) = X - 0-S* eae +5 - 34,500 2O:Sx : 4X > 34,500 . X= 5354 ve ERI T: S354 Hexe Indifexence point 16 25°S.3S%Ft[Caminfine | eee ee Lavoesing— eee ae ee ee —_|Na\ie of the Fisens Mand N_cobich belongs} —— —|ta the Sarme wiSk cla6G_ undex LNT Approach —}+— —___|2:NOT appycach: a eed —__—|Tox_ ware SO7 Which of the +c90 ees base} joPAiemurm comtial Séryeitrite se Pasicutass |Finen M Leveved | Einen N Unlevered | EQIT 400,000 4,900,000 ___ 2 Tmievest M107! 1,00,c09 se | Cost of equity {Sv \Sk NM a i 2 bo je Pasticulass Pisco M1 Etaeo NI ETT mis 400,000 | 4,.00,000 i Lece:-Tnteyect 1.00,000):| =, | Ea 13,00 000 | 4,000,000 | £65: Tax @ S0/. 159,000 | 2.600.000 (@ - PRT LS0,000 | 2, 00000 | | [Equity Captializavion Rae OR | | | Cast of equity (ide) O'S OAS L _eIMayKket value of equity (5) 9.00,990 |13,33.333 _i IMaxket value of cebt (B) $499,990 ° | 1 MazKet value of Fisro Wy) [ou,00,900 1333333 i . lee ced ene oC coptincdece ice) a i | | Mo=Kd (-t)(@/V) + Ke CS/V/) {| Eizes 20- I Ko® 10% (1-0 56)/14,00900)\ + 157 /10.00000 | L4,00,000/ 24,00000)_|Ko= Sz (u2\ “4157 2) 2u 20.05 X[14\+ 157 f 10) {au} Vac) = 00294 0:0625 =: 06-0915 Ko = 9-157 | Eisen Ni al Ko: O+ 1SY lo = IS7. [ Natue of Cixen undes NOT Apoxooch: | | Value of Fisen ‘wv’ = EGIT (1-t) | (On\evewed) K | = 400,000 (1-050) ols | = 13.32.3384 al Value of ™M Uevexed):Value of unievesed + B(e) 2 13.33,334 +14,00,000 (0:50) = 13,33. 334+ 300,000 = 20,33 334 | Equity Maxket value of Fixe M = 2033334 -13.33, 334 _ = 4,060,900 Ke= 1.50009 108 | 34,00,090 | Me=2uaai. SS= (Comin[ax 1] a 1 1 Ko 2Kd C-t) (B/v) + Ke (S/u) = 10% C1-9:S0) (“28 909 )\ 421-427. (10,00,000 24 00,000 24,00 ,000 = Sy. x(14\ SDLAIL Xf 10) Vaal) 24) 70-929 +0-09925 =O UgGIS Ko SAU 297.