Q1 the net sales of a com. is 30cr.earning before interest and tax of the company as a % of net sales is 12% . the capital employed comprises rs 10cr of equity , rs 2 cr of 13%cumulative pref share capital and 15% debentures of rs 6 cr . income tax rate 40% ...
a)calculate the return on equiity for the company and indicate the segments due to the presence of pref share cap and borrowing(debentures)
SOLUTION segments due to the presence
segment of roe due to pref cap {0.20(1-0.4)-0.13}0.2 = -.002
segment of roe due to deb [0.20(1-.04) - 0.15(1-0.4]0.6 = 0.018
or -0.2% + 1.8% = 1.6%
after this they have also calculated wegihted average cost of capital
why have they done this? and what does this mean segmet due to presence and hw they calculated it? pls help me
Q2 abc ltd has an average cost of debt at 10% and tax rate is 40% . the financial leverage ratio for the compnay is .60 .calculate return on euqity if its return on inv is 20%
in ashish kalra buk there is a long formula for this..which i am nt able to understand .pls help me.
tell me in easy language or hindi even.
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