Amber Marbella is planning to invest on a certain project but will be needing of funds, fortunately its business has sufficient funds using its surplus and reserves for it to finance such project, the dividends to be paid during the current year is 20.00 per share, there is no expected growth for any dividends to be paid. Floatation cost of financing this project is expected to be at 5.00 per share. Based on the market, its share is trading for 50.00 per share. What is the cost of using such funds? a. 55.56% b. 44.44% c. 40% d. 60%
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Amber Marbella is planning to invest on a certain project but will be needing of funds, fortunately its business has sufficient funds using its surplus and reserves for it to finance such project, the dividends to be paid during the current year is 20.00 per share, there is no expected growth for any dividends to be paid. Floatation cost of financing this project is expected to be at 5.00 per share. Based on the market, its share is trading for 50.00 per share. What is the cost of using such funds?
a. 55.56%
b. 44.44%
c. 40%
d. 60%
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- Kohwe Corporation plans to issue equity to raise $50.7 million to finance a new investment. After making the investment, Kohwe expects to earn free cash flows of $10.4 million each year. Kohwe's only asset is this investment opportunity. Suppose the appropriate discount rate for Kohwe's future free cash flows is 7.7%, and the only capital market imperfections are corporate taxes and financial distress costs. a. What is the NPV of Kohwe's investment? b. What is the value of Kohwe if it finances the investment with equity? a. What is the NPV of Kohwe's investment? The NPV of Kohwe's investment is $ million. (Round to two decimal places.) b. What is the value of Kohwe if it finances the investment with equity? The Kohwe finances stment with equity $ million. (Round decimal places.)Axon Industries needs to raise $22.41M for a new investment project. If the firm issues one-year debt, it may haveto pay an interest rate of 9.44 %, although Axon's managers believe that 5.51 % would be a fair rate given the level of risk. If the firm issues equity, they believe the equity may be underpriced by 11.26 %. What is the cost to current shareholders of financing the project out of Equity? NOTE: Provide your answers in Millions. E.G. for 100M you must enter 100.0000, for 20M you must enter 20.0000, etc.ABC SAOG needs RO. 5 million for the installation of a new factory. The new factory expects to yield annual Earnings Before Interest and Tax (EBIT) of RO. 600,000. In choosing a financial plan, ABC SAOG has an objective of maximizing earnings per share (EPS). The company proposes to issue ordinary shares and raise the debt of RO. 500,000, RO. 1,500,000 or RO. 2,000,000. The current market price per share is RO. 350 and is expected to drop to RO. 150 if the funds are borrowed in excess of RO. 1,800,000. Funds can be borrowed at the following rates: Up to RO. 500,000 at 7% Over RO. 500,000 to RO. 2,000,000 at 9% Over RO. 2,000,000 at 14% Assuming a tax rate of 40%, advise the company.
- (1)Find the required rate of return on Oakfield stocks? (ii)What is the beta of the company's existing portfolio of assets? 4. Kangaroo and Kimiti Co.Ltd is attempting to evaluate the feasibility of investing tshs 95 million in a piece of equipment with a five year lifespan. The company has estimated the profits after taxes and cash inflows associated with the project as follows: Year Profit after Cash flow("000") taxes("000") 1 انه ای 2 3 4 5 5000 3000 9000 14000 19000 The company has 12% cost of capital. 6/17/2021 8:05:06 PM 20000 25000 30000 35000 40000 Page 1 of 2Kohwe Corporation plans to issue equity to raise $50 million to finance a new investment. After making the investment, Kohwe expects to earn free cash flows of $10 million each year. Kohwe currently has 5 million shares outstanding, and has no other assets or opportunities. Suppose the appropriate discount rate for Kohwe's future free cash flows is 8%, and the only capital market imperfections are corporate taxes and financial distress costs. a. What is the NPV of Kohwe's investment? b. What is Kohwe's share price today? Suppose Kohwe borrows the $50 million instead. The finn will pay interest only on this loan each year, and maintain an outstanding balance of $40 million on the loan. Suppose that Kohwe's corporate tax rate is 35%, and expected free cash flows are still $9 million each year. c. What is Kohwe's share price today if the investment is financed with debt? Now suppose that with leverage, Kohwe's expected free cash flows wiH decline to $8 million per year due…A firm is considering a new project which would be similar in terms of risk to its existing projed The firm needs a discount rate for evaluation purposes. The firm has enough cash on hand provide the necessary equity financing for the project. Also, the firm has 1,000,000 common shan outstanding with a current market price of GHe11 per share. Next year's dividend is expected be GHc1 per share and the firm estimates dividends will grow at 5% per year for the next sever years. The firm also has 150,000 preferred shares outstanding with a current market price GH¢10 per share. Dividend of GHe0.9 per share is paid on preferred stock. The firm has a total o GH¢10,000,000 in debt outstanding. The debt stock is currently valued at of GH¢9,500,000. Th yield on the debt is 8%. The firm's tax rate is 20%. The project requires an initial capital investmen of GHc500,000. However, the project is expected to generate GH¢100,000 annually in perpetuity. Required: i Calculate the WACC for this project?…
- Blue Inc.’s has insufficient retained earnings to fund capital projects and must, therefore, issue new common stock. Blue Inc.’s stock currently has a price of P50 per share and is expected to pay a year-end dividend of P5 per share. The dividend is expected to grow at a constant rate of 2% per year. The new stock has an estimated flotation cost of P5 per share. What is the company’s cost of equity capital? a. 11.11% b. 12.23% c. 13.11% d. 14.00%The Barrell Company is approached by a bank that offers to implement a lockbox system of receipts for the firm. If the new system is implemented, it will reduce float by 6 days per year. If Barrell's cost of capital is 11.5% and its annual sales are expected to be P10,00,000, then what is the maximum amount that Barrell is willing to pay for the lockbox system? O P164,438.56 O P18,904.11 O P1,150,000.00 O P1,890.41Woc inc. wants to increase its free cash flow by PIBO milion during the coming year, which should result in a higher EVA and stock price. The CO has made these projections for the upcoming year: • CBIT Is projected to equal PRSO millon * Gross capital expenditures are enpected to total to P60 milien versus depreciation of P120 millon, so its net capital expenditures should total P240 million. • The tan rate is 0N. • There will be no changes in cash or marketable securitien, nor willthere be any changes in notes payable or accruals what increase in net working capital in milions) would enable the firm ta meet its target increase in O P 72 O P130 O P156 O P108 O P 90
- The question has two parts. Show all calculations. a. Fury Ltd's equity has beta of 1.3. If the expected market return is 12% and the risk-free rate is 4%. Calculate the cost of eqwuity of Fury Limited. ( Show answer as a percentage correct to 1 decimal place). b. Ironbark Ltd has a new factory under consideration, which is expected to generate before tax cash flows of $2,500,000 forever. Ironbark Ltd is currently operating at its target debt-to-equity ratio of 0.25. The new factory is expected to cost $10,000. The company tax rate is 30%. The company wishes to raise the fund for the new project by a new issue of 20-year bonds with a yield to maturity of 9% p.a. (the flotation costs of the new debt would be 4% of the amount raised) and a new issue of ordinary shares with a required return of 16% p.a.(the flotation costs of the new share issue would be 14% of the amount raised). Calculate the net present value (NPV) of the new project. Explain if the company should accept this project…A firm is considering a new project which would be similar in terms of risk to its existing projects. The firm needs a discount rate for evaluation purposes. The firm has enough cash on hand to provide the necessary equity financing for the project. Also, the firm has 1,000,000 common shares outstanding with a current market price of GH¢11 per share. Next year's dividend is expected to be GH¢1 per share and the firm estimates dividends will grow at 5% per year for the next several years. The firm also has 150,000 preferred shares outstanding with a current market price of GH¢10 per share. Dividend of GH¢0.9 per share is paid on preferred stock. The firm has a total of GH¢10,000,000 in debt outstanding. The debt stock is currently valued at of GH¢9,500,000. The yield on the debt is 8%. The firm's tax rate is 20%. The project requires an initial capital investment of GH¢500,000. However, the project is expected to generate GH¢100,000 annually in perpetuity. Required: i. Calculate the…PCA Ltd is a listed firm and considering to invest in a new project. The new project would be having the same business risk and the same leverage as that of the company. Please consider the information below and answer the following question assuming that the CAPM holds. Relevant information Risk Free Rate Historical standard deviation of the market Market Risk Premium 5.00% 10.00% 10.00% Last year market return Tax Rate of PCA Ltd 25.60% 30.00% Cost of debt of PCA Ltd 10.00% Beta of PCA Ltd. Value of Long Term Debt of PCA Ltd No. of shares outstanding for PCA Ltd Book value per share of shares of PCA Ltd Average per share price of shares of PCA Ltd 1.5 15,00,00,000 1,00,00,000 10 17.5