Tutor profile: Muhammed Y.
Subject: Corporate Finance
When should a company consider issuing debt instead of equity?
A company should always optimize its capital structure. If it has taxable income it can benefit from the tax shield of issuing debt. If the firm has immediately steady cash flows and is able to make their interest payments it may make sense to issue debt if it lowers the WACC.
A company acquired a software for internal use from the USA on 28.01.2017 for the US $ 100000. The exchange rate on that date was Rs. 52 per USD. The seller allowed trade discount @5%. Other expenditures are 1) Import duty - 20% 2) Purchase Tax - 10% 3) Entry Tax - 5% (recoverable later from tax department) 4) Installation expenses - Rs. 25000 5) profession fees for clearance from customs - Rs. 20000 compute the amount to be capitalized?
Calculation of Cost of Software acquired for internal use Purchase cost of the software - $ 100000 Less : trade discount @5% - $ 5000 $95000 Cost in Rs. ( US $ 95000*52) - 4940000 Add : Import duty on cost @20%- 988000 5928000 Purchase tax @10% - 592800 Installation expenses - 25000 profession fee clearance - 20000 cost of software to be capitalized- 6565800
State points which highlight the importance of delegation for an organisation.
Importance of Delegation (any three): (i) Delegation leads to effective management through empowerment of employees. (ii) Delegation helps in employee development by providing them with the chance to use their skills and experience. (iii) Delegation motivates employees by giving them a responsibility which builds their self-esteem. (iv) Delegation facilitates growth by providing the ready workforce to take up any expansion program. (v) Delegation provides a basis of management hierarchy by establishing a superior-subordinate relationship. (vi) Delegation helps in better coordination as it avoids overlapping of duties.
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