University : Cardiff Metropolitan University UniLearnO is not sponsored or endorsed by this college or university.
Subject Code : BAC6004
Country : United Kingdom
Assignment Task

 

Learning Outcomes Covered

1) Calculate and interpret cost and sales variances

2) Identify relevant costs and appropriate techniques for decision making and use them to facilitate the solution of a range of realistic management problems

3) Evaluate capital expenditure projects using a range of recognised techniques

4) Explain and calculate the cost of capital 5) Evaluate competing theories relating to capital gearing and dividend policy and their impact on the development of corporate policies

Question 01

“Aquafresh” Bottle water company decide to introduce new mineral water and spring water to the market. Therefore, they have decided to sell some shares to raise capital as an investment for new inventory. Before the company decide return on the investment, company overlooked at the certain market indicators on the investment: Risk free rate (5 year)= 3%, Expected return on the market =10% and beta (β) = 1 Further, Company has common equity $ 5,000,000 and debt $2,000,000. Interest rate for the debt is 12% (annum) and corporate tax rate is 8%. “Aquafresh” willing to provide $ 900,000 preferred shares to Mr. A. James and cost of the preferred shares agreed by the company is 13%. “Aquafresh” plans to undertake two major mutually exclusive projects (with initial cost of $10,000,000. Expected return for each project for next 5 years are as follows 

 

 

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  • Posted on : March 06th, 2019

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