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CF Assignment 2

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38 views1 page

CF Assignment 2

Uploaded by

jumajohn0013
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

THE COOPERATIVE UNIVERSITY OF KENYA

UNIT TITLE: CORPORATE FINANCE


ASSIGNMENT TWO
INSTRUCTIONS
Answer All Questions
a) What is the meaning of behavioral finance, explain the behavioral asset pricing(5mks)
b) A company leverage Ltd has an expected annual operating income (EBIT) of shs.50,[Link]
company has shs.200,000,10% debentures. The cost of equity of the company is 12.5%.
Required
i. What is the value of the firm and the overall cost of capital(5mks)?
ii. Suppose the firm has decided to raise the amount of debentures by shs.100,000. What is
the new value of the firm and the new overall cost of capital(5mks)?
c)Discuss Modigliani Miller(MM) Assumptions(5mks)

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