Marble Construction estimates that its WACC is % f equity comes from retained earnings However, if the company issues new stock to raise new equity, it estimates that its WACC will rise to 8.9%. The company believes that it will exhaust its retained earnings at $2,500,000 of capital due to the number of highly profitable projects available to the firm and its limited earnings. The company is considering the following seven investment projects: Project B C Size $ 640,000 1,040,000 1,000,000 1,180,000 470,000 9.3 D 9.2 E 8.7 F 82 G 8.3 Assume that each of these projects is independent and that each is just as risky as the firm's existing assets. Which set of projects should be accepted? Project A Cent IRR 13.5% 13.8 640,000 650,000

Olsen Outfitters Inc. believes that its optimal capital structure consists of 65% common equity and 35% debt, and its tax rate is 40%. Olsen must raise additional capital to fund it upcoming expansion.  The firm will have $2 million of retained earnings with a cost of rs = 11%.  New common stock in an amount up to $10,000 would have a cost of re = 12.5%.  Furthermore, Olsen can raise up to $4 million of debt at an interest rate of rd = 9% and an additional $3 million of debt at rd = 11%.  The CFO estimates that a proposed expansion would require an investment of $6.8 million.  What is the WACC for the last dollar raised to complete the expansion?  Round your answer to two decimal places.

As corporate manager for acquisitions, your group is assessing a project that is expected to produce cash flows of $750 at the end year 1, $1,000 at the end of year 2, $850 at the end of year 3, and $2,900 at the end of year 4. If the firm requires a minimum IRR or "hurdle rate" of 10% for these types of investments, what is most you should pay for this project?Your answer should be between 2738.00 and 4355.00 rounded to 2 decimal places, with no special characters.

GBATT has a capital need of $100 million to fund its operations.  GBATT has an equity investor that has made an investment in the common stock of GBATT for 60% of this amount but there is the anticipation is that they will earn a 15% return on this investment through capital returns and dividends.  This level of anticipated return takes into account the anticipated risk in the investment.  With this amount of capital support, GBATT was able to find a lender who will provide the balance of the capital needed at an interest rate of 10% with such debt to be paid out over 10 years.  Such lender will require GBATT to fully collateralize its buildings in support of its bond payments.   What is the cost of capital in this example?

Adamson Corporation is considering four average-risk projects with the following costs and rates of return: Project Cost Expected Rate of Return 1 $2,000 16.00% 2 3 4 3,000 5,000 2,000 15.00 13.75 12.50 The company estimates that it can issue debt at a rate of rd = 9%, and its tax rate is 25%. It can issue preferred stock that pays a constant dividend of $4.00 per year at $56.00 per share. Also, its common stock currently sells for $49.00 per share; the next expected dividend, D₁, is $5.75; and the dividend is expected to grow at a constant rate of 5% per year. The target capital structure consists of 75% common stock, 15% debt, and 10% preferred stock. a. What is the cost of each of the capital components? Do not round intermediate calculations. Round your answers to two decimal places. % Cost of debt: Cost of preferred stock: Cost of retained earnings: % % b. What is Adamson's WACC? Do not round intermediate calculations. Round your answer to two decimal places. % c. Only projects…

(11)

You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of dollars) of its profits and of its future investments in new plant and working capital: Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation Pretax profit Tax at 30% Investment Answer is complete but not entirely correct. a. Total value b. Laputa's equity 1 $ 73 33 40 $ $ 12 19 476 285 Year 2 $93 43 50 15 22 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 60% by equity and 40% by debt. Its cost of equity is 18%, its debt yields 9%, and it pays corporate tax at 30%. 3 $ 108 48 60 18 25 a. Estimate the company's total value. Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount. b. What is the value of Laputa's equity? Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole…

Consider a REIT that holds high quality office buildings in some of the best locations in the US. The REIT is currently traded at a price of $64/share and there are 130 million shares outstanding. Using the information below answer the following questions: Expected next year total revenue: $750M Expected next year total expenses (including interest and depreciation): $380M Expected next year depreciation: $90M Expected next year interest: $70M Total debt: $1.6B Current office CAP in the US: 4.5% to 6.0% depending on quality and location. a. What is your estimation for a fair market value for a share of the REIT described? Show your work! b. What is your estimation for a fair price to pay for a share of the REIT described, if you require a 7.5% rate of return on an unlevered basis and expect the REIT to increase NOI at an average rate of 2.5%? Should you buy shares of that REIT?

Turnbull Co. is considering a project that requires an initial investment of $570,000. The firm will raise the $570,000 in capital by issuing $230,000 of debt at a before-tax cost of 10.2%, $20,000 of preferred stock at a cost of 11.4%, and $320,000 of equity at a cost of 14.3%. The firm faces a tax rate of 25%. What will be the WACC for this project? (Note: Round your intermediate calculations to three decimal places.) Consider the case of Kuhn Co. Kuhn Co. is considering a new project that will require an initial investment of $4 million. It has a target capital structure of 35% debt, 2% preferred stock, and 63% common equity. Kuhn has noncallable bonds outstanding that mature in 15 years with a face value of $1,000, an annual coupon rate of 11%, and a market price of $1555.38. The yield on the company's current bonds is a good approximation of the yield on any new bonds that it issues. The company can sell shares of preferred stock that pay an annual dividend of $9 at a price of…