Question

'Smart Stationery Ltd.' wants to raise funds of 40,00,000 for its new project. The management is considering the following mix of debt and equity to raise this amount :

Capital Structure

Alternative

I

II

III

Equity

40,00,000

30,00,000

10,00,000

Debt

0

10,00,000

30,00,000



Other details are as follows:

Interest Rate on Debt 9%

Face value of Equity Shares 100 each

Tax Rate 30%

Earnings before Interest and

Tax (EBIT) 76,00,000

Answer 1

Answer:

1.1.2004, a machinary was purchased for

Rs. 80,000. On 1.1.2005 additions were made to

the amount of Rs. 40,000. On 31.3.2006,

machinery purchased on 1.1.2005 costingRs. 12,000 was sold for Rs. 11,000, and on

30.6.2006, machinery purchased on 1.1.2004

costing Rs. 32,000 was sold for Rs. 26,700. On

1.10.2006 additions were made to the amount of

Rs. 20,000. Depreciation was provided at 10% per

annum on diminishing balance method.

Show the machinery A/c for three years from

2004-2006 (Accounts are closed every year on