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# Managing Financial Resources and Decisions

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Managing Financial Resources and Decisions Table of Contents Introductions——————————————————————————-3 2.1 a) Calculation for the Cost of Ordinary Share Capital—————————-3 2.1 b) Calculation for the Cost of Preference Capital———————————3 2.1 c) Calculations for the Cost of Debenture Capital after Tax———————3 2.1 d) Calculation for the weighted average Cost of Capital of the company——4 2.2 Importance of the financial planning————————————————4 2.3 Informational needs of Directors, Senior Managers and Junior Managers—–5 2.4 Impact of the financial statements————————————————–6 Bibliography———————————————————————————7 2.1 Introduction The financial Report is provided by Brian Harris Chartered Accountants to assist our client, X Limited, in understanding the results of financial condition and operations calculated in order to facilitate better and more effective decision making. 2.1 a) Calculate the cost of Ordinary Share Capital: Dividend Growth Model: Po = A£2 = 200 p Po=market price for each share Do = 10 p Do= Company payment g =8% = 0.08 g= growth rate in dividend 2.1 b) Calculate the Cost of Preference Share Capital: Pp = A£ 1.20 each Dp= annual dividend of preference share Dp = 12 % = 12/ 100 =0.12 Pp= market price of the preference stock Kp= cost of preference share capital 2.1 c) Calculate the Cost of Debenture Capital after tax: I = 10 %= A£ 1, 000 I= interest rate Taxation= 20% t =taxation Pd = A£125 Pd = price of debenture Kd= cost of debenture capital after tax 2.1 d) Calculate the weighted average cost of Capital of the company:

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“Managing Financial Resources and Decisions”

 MV (market value) CDC % OSC (Ordinary share capital) 2000 x 2 =4000 13.40 PSC ( Preference share capital) 1000 x 1.20 = 1200 10.00 D (debenture) 125% x 1000 = 1250 6.40 COC (cost of capital) 6450

• The public policy perspective– related with informing the stakeholders and public about the important issues of the day
• Client perspective-related with people that sponsor work in the company, or those that make arrangements about pilot projects, researches and other type of projects, and how to meet their expectations.
• Internal business perspective– refers at managing successfully any activities based on communication with staff, researches conducted in the company.
• The Innovation and Learning perspective– refers at the training the staff should take to reach the skill level that is in accordance with the company’s policies, to work efficiently, and how to overcome the cultural barriers in the company, by building the inclusive culture.
• The Financial Perspective – refers at the rising funds that are imperative to support the researches are made by the company, and controlling and managing in an efficient way the company’s resources.

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