QUESTION 1Dixon Corp’s preferred stock does not mature (it is a “perpetual preferred”). Each share of preferred stock pays a fixed dividend of $5.15 per year, and is currently selling for $62. Estimate Dixon’s marginal cost of preferred equity. Dixon faces a marginal tax rate of 30%. 10.10% 12.04% 5.81% 7.07% 8.31% QUESTION 2Check the information provided for Terra Corp. The project’s cash flow for the last year is expected to be: $143,700 $123,700 $146,200 $149,200 $172,200 QUESTION 3Dixon Corp has 6% coupon bonds outstanding that have a remaining maturity of 12 years. These bonds pay interest semiannually, and are currently selling for $1080 per $1000 face value. If Dixon issues new debt, it plans to sell bonds with a maturity of 12 years. Estimate Dixon's marginal pre-tax cost of debt. Dixon faces a marginal tax rate of 30%. 5.10% 4.15% 6.22% 3.57% 2.55% QUESTION 4Check the information provided for Terra Corp. The project’s operating cash flow (OCF) for all years except the last year is expected to be: $54,267 $37,800 $21,250 $57,200 $62,700 QUESTION 5Check the information provided for Terra Corp. The rate of return or return on investment on this project is estimated to be: 12.92% 7.72% 7.41% 13.11% 10.07% QUESTION 6Dixon Corp has 6% coupon bonds outstanding that have a remaining maturity of 12 years. These bonds pay interest semiannually, and are currently selling for $1080 per $1000 face value. If Dixon issues new debt, it plans to sell bonds with a maturity of 12 years. Estimate Dixon's marginal post-tax cost of debt. Dixon faces a marginal tax rate of 30%. 3.06% 4.15% 4.35% 3.57% 2.90% QUESTION 7You may want to work the other FOUR Dixon Corp problems before trying this one: If Dixon Corp plans to raise 25% of any new financing with debt, 15% with preferred equity, and 60% with common equity, estimate Dixon's weighted average cost of capital. Dixon's marginal tax rate is 30%. 2.78% 8.81% 2.66% 7.97% 8.34% QUESTION 8Dixon Corp has announced a per-share dividend of $5.25 for the year just ended. The company’s earnings and dividends per share are expected to grow at a steady rate of 4.50% for the foreseeable future. Each share of the company’s common stock is currently trading for $94. Estimate Dixon’s marginal cost of common equity. Dixon faces a marginal tax rate of 30%. 5.84% 10.34% 7.24% 13.54% 9.79% QUESTION 9Check the information provided for Terra Corp. The net present value of the project is estimated to be: $34,774 $37,694 $23,976 $16,353 $1,337 QUESTION 10Information for Terra Corp. Terra Corp is considering the purchase of a machine that is expected to cost $180,000. The machine will require an additional $40,000 to have it shipped, modified, and installed. The purchase of this machine is expected to require additional working capital of $20,000 upfront, which will be liquidated when the machine is sold off. Terra expects to use the machine for 4 years, and then sell it for $95,000. The machine will be fully depreciated over the four years, at a constant rate. In each of the four years, Terra’s revenues are expected to be $85,000 higher than they would be without the machine. Annual operating costs (not including depreciation) will also be higher, however, to the extent of $19,000. The firm pays a 30% rate in taxes, and its cost of capital is 7.5%. The initial outflow of cash for the proposed project is expected to be: $220,000 $200,000 $180,000 $190,000 $240,000

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QUESTION 1Dixon Corp’s preferred stock does not mature (it is a “perpetual preferred”).  Each share of preferred stock pays a fixed dividend of $5.15 per year, and is currently selling for $62.  Estimate Dixon’s marginal cost of preferred equity.  Dixon faces a marginal tax rate of 30%.  10.10%  12.04%  5.81%  7.07%  8.31% QUESTION 2Check the information provided for Terra Corp. The project’s cash flow for the last year is expected to be:  $143,700  $123,700  $146,200  $149,200  $172,200 QUESTION 3Dixon Corp has 6% coupon bonds outstanding that have a remaining maturity of 12 years.  These bonds pay interest semiannually, and are currently selling for $1080 per $1000 face value.  If Dixon issues new debt, it plans to sell bonds with a maturity of 12 years.  Estimate Dixon's marginal pre-tax cost of debt.  Dixon faces a marginal tax rate of 30%.  5.10%  4.15%  6.22%  3.57%  2.55% QUESTION 4Check the information provided for Terra Corp. The project’s operating cash flow (OCF) for all years except the last year is expected to be:  $54,267  $37,800  $21,250  $57,200  $62,700 QUESTION 5Check the information provided for Terra Corp. The rate of return or return on investment on this project is estimated to be:  12.92%  7.72%  7.41%  13.11%  10.07% QUESTION 6Dixon Corp has 6% coupon bonds outstanding that have a remaining maturity of 12 years.  These bonds pay interest semiannually, and are currently selling for $1080 per $1000 face value.  If Dixon issues new debt, it plans to sell bonds with a maturity of 12 years.  Estimate Dixon's marginal post-tax cost of debt.  Dixon faces a marginal tax rate of 30%.  3.06%  4.15%  4.35%  3.57%  2.90% QUESTION 7You may want to work the other FOUR Dixon Corp problems before trying this one: If Dixon Corp plans to raise 25% of any new financing with debt, 15% with preferred equity, and 60% with common equity, estimate Dixon's weighted average cost of capital.  Dixon's marginal tax rate is 30%.  2.78%  8.81%  2.66%  7.97%  8.34% QUESTION 8Dixon Corp has announced a per-share dividend of $5.25 for the year just ended.  The company’s earnings and dividends per share are expected to grow at a steady rate of 4.50% for the foreseeable future.  Each share of the company’s common stock is currently trading for $94.  Estimate Dixon’s marginal cost of common equity.  Dixon faces a marginal tax rate of 30%.  5.84%  10.34%  7.24%  13.54%  9.79% QUESTION 9Check the information provided for Terra Corp. The net present value of the project is estimated to be:  $34,774  $37,694  $23,976  $16,353  $1,337 QUESTION 10Information for Terra Corp. Terra Corp is considering the purchase of a machine that is expected to cost $180,000.  The machine will require an additional $40,000 to have it shipped, modified, and installed.  The purchase of this machine is expected to require additional working capital of $20,000 upfront, which will be liquidated when the machine is sold off.  Terra expects to use the machine for 4 years, and then sell it for $95,000.  The machine will be fully depreciated over the four years, at a constant rate.  In each of the four years, Terra’s revenues are expected to be $85,000 higher than they would be without the machine.  Annual operating costs (not including depreciation) will also be higher, however, to the extent of $19,000.  The firm pays a 30% rate in taxes, and its cost of capital is 7.5%.  The initial outflow of cash for the proposed project is expected to be:  $220,000  $200,000  $180,000  $190,000  $240,000

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Hi there. Thank you for the question. Post has multiple questions. As per company guidelines expert…