Homework Answers
Weight of equity = 1 / (1 +d/e ratio)
Weight of equity = 1 / (1 + 0.4)
Weight of equity = 0.7143
Weight of debt = 1 - 0.7143 = 0.2857
WACC = Weights * costs
WACC = 0.7143*0.12 + 0.2857*0.08*(1 - 0.34)
WACC = 0.085716 + 0.015085
WACC = 0.1008 or 10.08%
Net present value = Present value of cash inflows - present value of cash outflows
Net present value = -45,000 + 30,000 / (1 + 0.1008)^1 + 30,000 / (1 + 0.08)^2
Net present value = $7,010.27
Add Answer to:
Antonio's is analyzing a project with an initial cost of $45,000 and cash inflows of 30,000...
Stag corp has a capital structure which is based on 50% common stock, 20% preferred stock...
Stag corp has a capital structure which is based on 50% common stock, 20% preferred stock and 30% debt. The cost of common stock is 14%, the cost of preferred stock is 8% and the pre-tax cost of debt is 10%. The firm's tax rate is 40%. (1 mark) a. Calculate the WACC of the firm. b. The firm is considering a project that is equally as risky as the firm's current operations. This project has initial costs of $280,000...
Consider an all-equity project with the following characteristics: · Cash inflows = $18,000 per year in...
Consider an all-equity project with the following characteristics: · Cash inflows = $18,000 per year in perpetuity · Cash outflows (costs) =50% of cash inflows · Corporate tax rate = 35% · Cost of capital of all-equity project = 12% Now suppose that the management issues debt to finance a share repurchase program. The new cost of capital of the levered project is 10%. (Hint: Solve part a. first). a) Using this information, determine the present value of the tax...
Q2. What is the EAC of two projects: project A, which costs $150 and is expected...
Q2. What is the EAC of two projects: project A, which costs $150 and is expected to last two years, and project B, which costs $190 and is expected to last three years? The cost of capital is 12%. (1 mark) Answer: Q3. A company pays annual dividends of $10.40 with no possibility of it changing in the next several years. If the firm’s stock is currently selling at $80, what is the required rate of return? (1 mark) Answer:...
Joshua Industries is considering a new project with cash inflows of $500,000 for the indefinite future....
Joshua Industries is considering a new project with cash inflows of $500,000 for the indefinite future. Cash costs are 60 percent of the cash inflows. The initial cost of the investment is $700,000. The tax rate is 15 percent and the unlevered cost of equity is 17 percent. The firm is financing $170,000 of the project cost with debt. What is the adjusted present value of the project? Question 26 options: $102,429.67 $98,311.16 $93,940.85 $106,470.59 $325,500.00
AP Products has a pretax cost of debt of 6.4 percent and an unlevered cost of...
AP Products has a pretax cost of debt of 6.4 percent and an unlevered cost of capital of 12.6 percent. The firm's tax rate is 35 percent and the cost of equity is 16.8 percent. What is the firm's debt-equity ratio? OA) 1.61 OB) 1.04 OC) 1.23 OD) 1.39 OE) 1.07
A project has an initial cost of $45,000, expected net cash inflows of $9,000 per year...
A project has an initial cost of $45,000, expected net cash inflows of $9,000 per year for 9 years, and a cost of capital of 10%. What is the project's IRR? Round your answer to two decimal places.
A project has an initial cost of $45,000, expected net cash inflows of $9,000 per year...
A project has an initial cost of $45,000, expected net cash inflows of $9,000 per year for 9 years, and a cost of capital of 9%. What is the project's IRR? Round your answer to two decimal places.
Alaskan Markets has a target capital structure of 40 percent debt and 60 percent equity. The...
Alaskan Markets has a target capital structure of 40 percent debt and 60 percent equity. The pretax cost of debt is 6.3 percent, the tax rate is 35 percent, and the cost of equity is 14.6 percent. The firm is considering a project that is equally as risky as the overall firm. The project has an initial cash outflow of $1.92 million and annual cash inflows of $562,000 at the end of each year for 4 years. What is the...
Assignment Questions Q1: Carrefour is expecting its new center to generate the following cash flows: Years...
Assignment Questions Q1: Carrefour is expecting its new center to generate the following cash flows: Years 0 1 2 3 4 5 Initial Investment ($35,000,000) Net operating cash-flow $6,000,000 $8,000,000 $16,000,000 $20,000,000 $30,000,000 a. Determine the payback for this new center. (1 mark) b. Determine the net present value using a cost of capital of 15 percent. Should the project be accepted? (1 mark) Answer: Q2. What is the EAC of two projects: project A, which costs $150 and is...
Yesteryear Productions is considering a project with an initial start up cost of $740,000. The firm maintains a debt-equ...
Yesteryear Productions is considering a project with an initial start up cost of $740,000. The firm maintains a debt-equity ratio of .50 and has a flotation cost of debt of 6.2 percent and a flotation cost of equity of 13.1 percent. The firm has sufficient internally generated equity to cover the equity cost of this project. What is the initial cost of the project including the flotation costs?
AP Products has a pretax cost of debt of 6.4 percent and an unlevered cost of capital of 12.6 percent. The firm's tax rate is 35 percent and the cost of equity is 16.8 percent. What is the firm's debt-equity ratio? OA) 1.61 OB) 1.04 OC) 1.23 OD) 1.39 OE) 1.07
Most questions answered within 3 hours.
-
Where is the error in this code sequence?
String s1 = "Hello";
String s2 = "ello";...
asked 10 months ago -
Financial data for Joel de Paris, Inc., for last year
follow:
Joel de Paris, Inc.
Balance...
asked 10 months ago -
Consider this reaction:
Al2(SO4)3 (aq)+ BaCl3
(aq) Al2Cl6 (aq)- +
3BaSO4(s) . What is the...
asked 10 months ago -
Suppose that Savneet is considering increasing her
recent random sample from 20 car rentals to 40...
asked 10 months ago -
Trucks arrive at an unloading terminal at an average rate of 120
per hour.
Trucks arrive...
asked 10 months ago -
Why are methanol and ethanol completely soluble in water while
octanol is not very little soluble....
asked 10 months ago -
A facilities manager at a university reads in a research report
that the mean amount of...
asked 10 months ago -
When the CuSO4 is rehydrated by adding water to the anhydrous
compound, is this an endothermic...
asked 10 months ago -
A ray of sunlight is passing from diamond into crown glass; the
angle of incidence is...
asked 10 months ago -
A block of mass 0.249 kg is placed on top of a light, vertical
spring of...
asked 10 months ago -
how do the kidneys compensate in the presences of acidosis
a) trigger hyperventilate
b) reserve acid...
asked 10 months ago -
Question 501 pts
The rental rate of capital to the firm increases. Which of the
following...
asked 10 months ago