2.1 Calculate the weighted average cost of capital by making use of target capital structure. 2.2 Briefly explain (giving reasons) whether the project under consideration should be accepted or not. 2.3 List the three steps used to calculate the weighted average cost of capital.
Dividend Policy
A dividend is a part of the profit paid to the shareholder in an organization. The management of the organization has the right to decide the policy for giving a dividend from the earnings to the shareholder. However, an organization is not in the obligation to declare a dividend for the investor. Dividend policy differs from organization to organization. As the management has the only authority to decide dividend rate, dividend amount, and time of dividend payout by considering all other elements that create an impact on the payment of a dividend.
Stocks And Dividends
Stock or equities are generally sold and bought in the Stock Exchange or which is popularly known as the stock market. Stocks are issued in the Stock Exchange for the sole purpose of raising funds for the Corporation or the company itself. Now since an individual has purchased a portion of the Corporation or company, he or she may claim to be a part of the earnings or profit of the company.
Case study 02 - Cost of capital
Makhado Limited has a target capital structure of 60% equity and 40% debt. The before-tax cost of debt is 7.64% and the
2.1 Calculate the weighted average cost of capital by making use of target capital structure.
2.2 Briefly explain (giving reasons) whether the project under consideration should be accepted or not.
2.3 List the three steps used to calculate the weighted average cost of capital.
2.4 Outline the fundamental assumptions of weighted average cost of capital.
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