A firm has target debt-equity ratio of 0.60. The flotation cost for equity is 5% and the flotation cost for debt is 3%. The firm needs $10,000,000 investment to undertake a project. How much should the firm raise to account for flotation costs and the initial investment need of the project?
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- You are considering a project which requires $250,000 in external financing. The flotation cost of equity is 7% and the flotation cost of debt is 2.5%. You wish to maintain a debt-equity ratio of 0.55. What is the initial cost of the project including the flotation costs? a. $235,720 b. $263,508 c. $264,280 d. $254,752 e. $255,784Suppose Mullens Corporation is considering three average-risk projects with the following costs and rates of return: Project Cost Expected Rate of Return 1 $2,500 23.00% 2 $3,000 30.00% 3 $2,750 24.00% Mullens estimates that it can issue debt at a rate of rd=20.00%rd=20.00% and a tax rate of T=25.00%T=25.00%. It can issue preferred stock that pays a constant dividend of Dp=$20.00Dp=$20.00 per year and at Pp=$200.00Pp=$200.00 per share. Also, its common stock currently sells for P0=$16.00P0=$16.00 per share. The expected dividend payment of the common stock is D1=$4.00D1=$4.00 and the dividend is expected to grow at a constant annual rate of g=5.00%g=5.00% per year. Mullens’ target capital structure consists of ws=75.00%ws=75.00% common stock, wd=15.00%wd=15.00% debt, and wp=10.00%wp=10.00% preferred stock. 1.According to the video, the after-tax cost of debt can be stated as ________________ . Plugging in the values for rdrd and (T)T yields an after-tax cost of…b. Given that you wish to use the payback rule with a cutoff period of 2 years, which projects would you accept? c. If you use a cutoff period of 3 years with the discounted payback rule, which projects would you accept? d. Which projects have positive NPVS?
- Better plc is comparing two mutually exclusive projects, whose details are given below.The company’s cost of capital is 12 per cent.Project A Project B£m £mYear 0 (150) (152)Year 1 40 80Year 2 50 80Year 3 60 50Year 4 60 40Year 5 80 30(a). Using the net present value method, which project should be accepted?(b). Using the internal rate of return method, which project should be accepted?(c). If the cost of capital increases to 20 per cent in year 5, would your advice change? Hello.i have the solution you send me but i am trying to understand where did you get the calculations for in the worknotes tabel. I did my own calculation but i dont get the same answer. For example for year 2 for project A you have 39.8597 How did you get to that without using the formula in excel. I need to write down the actual numbers. I got 22.3214 some im not sure how you got to that number. Can you help me please? Thank youThe Sugar Cookie Company needs to raise $200 million for a project. If external financing is used, the firm faces flotation costs of 6% for equity and 3% for debt. If the project is financed 60% with equity and 40% with debt, how much cash must the firm raise in order to finance the project? O A. O B. O C. O D. OE. $212.31 million $175.16 million $161.57 million $210.08 million $209.42 millionBetter plc is comparing two mutually exclusive projects, whose details are given below.The company’s cost of capital is 12 per cent.Project A Project B£m £mYear 0 (150) (152)Year 1 40 80Year 2 50 80Year 3 60 50Year 4 60 40Year 5 80 30(a). Using the net present value method, which project should be accepted?(b). Using the internal rate of return method, which project should be accepted?(c). If the cost of capital increases to 20 per cent in year 5, would your advice change? Hello.i have the solution you send me but i am trying to understand where did you get the calculations for in the worknotes tabel. I still cant calculate the IRR.i really dont understand how to do it. Can you help me please by using the numbers in the tabel so i can understand what is that you are adding or taking away please? I know how to calculate the NPV but not the IRR. I have went over and over this IRR but i still dont understand how you calculate it using the pv and the npv.i dont wanna use excel.
- Better plc is comparing two mutually exclusive projects, whose details are given below.The company’s cost of capital is 12 per cent.Project A Project B£m £mYear 0 (150) (152)Year 1 40 80Year 2 50 80Year 3 60 50Year 4 60 40Year 5 80 30(a). Using the net present value method, which project should be accepted?(b). Using the internal rate of return method, which project should be accepted?(c). If the cost of capital increases to 20 per cent in year 5, would your advice change? Hello.i have the solution you send me but i am trying to understand where did you get the calculations for in the worknotes tabel. I still cant calculate the IRR.i really dont understand how to do it. Can you help me please by using the numbers in the tabel so i can understand what is that you are adding or taking away please? I know how to calculate the NPV but not the IRRBetter plc is comparing two mutually exclusive projects, whose details are given below.The company’s cost of capital is 12 per cent.Project A Project B£m £mYear 0 (150) (152)Year 1 40 80Year 2 50 80Year 3 60 50Year 4 60 40Year 5 80 30(a). Using the net present value method, which project should be accepted?(b). Using the internal rate of return method, which project should be accepted?(c). If the cost of capital increases to 20 per cent in year 5, would your advice change?Better plc is comparing two mutually exclusive projects, whose details are given below.The company’s cost of capital is 12 per cent.Project A Project B£m £mYear 0 (150) (152)Year 1 40 80Year 2 50 80Year 3 60 50Year 4 60 40Year 5 80 30(a). Using the net present value method, which project should be accepted?(b). Using the internal rate of return method, which project should be accepted?(c). If the cost of capital increases to 20 per cent in year 5, would your advice change? Hello.i have the solution you send me but i am trying to understand where did you get the calculations for in the worknotes tabel. I did my own calculation but i dont get the same answer. Could you show mw the calculation but not in excel please, i need the calculation by formula manually
- A firm is considering the following projects. Its opportunity cost of capital is 9%. Cash Flows, $ 2 3 +1,050 +3,100 0 0 +1,200 +2,100 +3,100 -5,200 +1,050 +1,050 +3,100 +5,200 Project Time: A a-1. What is the payback period on each project? (Do not round intermediate calculations. Round your answers to the nearest whole number.) Project A Project B Project C 1 -5,200 +1,050 -1,200 Project A Project B Project C Payback Period years years years a-2. What is the discounted payback period on each project? (Do not round intermediate calculations. Round your answers to 2 decimal places. If any of the projects does not pay back on a discounted basis, enter zero ("0").) Discounted Payback Period years years years b. Given that you wish to use the payback rule with a cutoff period of 2 years, which projects would you accept?A project requires an initial investment of $500,000. This project will generate a future cash flow of $100,000/year for 8 years. The WACC of the firm is 8%. The cost of equity of this firm is 12%. The cost of debt of this firm is 6%. The risk-free rate is 3%. The floatation cost of equity is 4%. The floatation cost of debt is 2%. The target debt-to-equity ratio is 0.5. What is the NPV of this project?A company is considering a long term investment that requires a $45.000 investment today, andthen in 4 years promises a payout of $55.500 with prob. 0.4 and a payout of $66.000 with prob0.6. If the opportunity cost of capital for the compay is 8%, what is the expected net presentvalue?a) 425b) 433c) 441d) 449
