Panelli's is analyzing a project with an initial cost of $139,000 and cash inflows of $74,000 in Year 1 and S86.000 in Year 2. This project is an extension of current operations and thus is equally as risky as the current company. The company uses only debt and common stock to finance its operations and maintains a debt-equity ratio of .39. The aftertax cost of debt is 5.1 percent, the cost of equity is 13.2 percent, and the tax rate is 21 percent. What is the projected net present value of this project? O -$2,399 O $938 O-$1,807 O $1,109
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- Company T has a debt-to-equity ratio of 0.50. The company is considering a project that will require an initial investment of $54 million. The company's chief financial officer believes that all the investment needed will have to be raised externally. The flotation cost when issuing new equity is estimated to be 6.5% while the cost of issuing new debt is 2.6%. (1) What is the weighted average flotation cost percentage, and (2) by how much does it increase the amount that needs to be raised in order to cover the flotation costs?Antonio's is analyzing a project with an initial cost of $39,000 and cash inflows of $25,000 a year for 2 years. This project is an extension of the firm's current operations and thus is equally as risky as the current firm. The firm uses only debt and common stock to finance their operations and maintains a debt-equity ratio of 0.8. The pre-tax cost of debt is 7.8 percent and the cost of equity is 11.4 percent. The tax rate is 34 percent. What is the projected net present value of this project? Multiple Choice $3.435.10 $5,204.70Montclair Company is considering a project that will require a $520,000 loan. It presently has total liabilities of $210,000 and total assets of $630,000. 1. Compute Montclair's (a) current debt-to-equity ratio and (b) the debt-to-equity ratio assuming it borrows $520,000 to fund the project. 2. If Montclair borrows the funds, does its financing structure become more or less risky? 1. (a) 1. (b) 2. 1 Choose Denominator: 1 1 1 If Montclair borrows the funds, does its financing structure become more or less risky? Choose Numerator: Debt-to-Equity Ratio
- Kamara Manufacturing has a debt-equity ratio of 0.3. The firm is analyzing a new project that requires an initial cash outlay of $268,500 for equipment. The flotation cost is 10.8 percent for equity and 6.1 percent for debt. What is the initial cost of the project including the flotation costs? Total initial cost = $Montclair Company is considering a project that will require a $500,000 loan. It presently has total liabilities of $220,000 and total assets of $620,000. 1. Compute Montclair’s (a) current debt-to-equity ratio and (b) the debt-to-equity ratio assuming it borrows $500,000 to fund the project. 2. If Montclair borrows the funds, does its financing structure become more or less risky?Alpha Inc. has a target debt-to-value ratio of .6. The pretax cost of debt is 10 percent, the tax rate is 21 percent, and the unlevered cost of equity 14 percent. A project the firm is considering has a cash flow to the levered equity holders of $49,661 and an initial unborrowed cost of $220,000. What is the NPV of the project?
- Gnomes R Us is considering a new project. The company has a debt-equity ratio of .72. The company’s cost of equity is 14.7 percent, and the aftertax cost of debt is 8 percent. The firm feels that the project is riskier than the company as a whole and that it should use an adjustment factor of +2 percent. a. What is the company’s WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What discount rate should the firm use for the project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)Western Wear is considering a project that requires an initial investment of $602,000. The firm maintains a debt-equity ratio of .55 and has a flotation cost of debt of 4.9 percent and a flotation cost of equity of 10.2 percent. The firm has sufficient internally generated equity to cover the equity portion of this project. What is the initial cost of the project including the flotation costs?Gnomes R Us is considering a new project. The company has a debt-equity ratio of .86. The company's cost of equity is 14.6 percent, and the aftertax cost of debt is 7.9 percent. The firm feels that the project is riskier than the company as a whole and that it should use an adjustment factor of +3 percent. a. What is the company's WACC? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. What discount rate should the firm use for the project? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. a. WACC b. Project discount rate %
- 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.Assume that Hogan Surgical Instruments Co. has $3,100,000 in assets. If it goes with a low-liquidity plan for the assets, it can earn a return of 14 percent, but with a high-liquidity plan, the return will be 10 percent. If the firm goes with a short-term financing plan, the financing costs on the $3,100,000 will be 6 percent, and with a long-term financing plan, the financing costs on the $3,100,000 will be 8 percent. a. Compute the anticipated return after financing costs with the most aggressive asset-financing mix. b. Compute the anticipated return after financing costs with the most conservative asset-financing mix.Assume that Hogan Surgical Instruments Co. has $3,400,000 in assets. If it goes with a low-liquidity plan for the assets, it can earn a return of 17 percent, but with a high-liquidity plan, the return will be 13 percent. If the firm goes with a short-term financing plan, the financing costs on the $3,400,000 will be 9 percent, and with a long-term financing plan, the financing costs on the $3,400,000 will be 11 percent. a. Compute the anticipated return after financing costs with the most aggressive asset-financing mix. Anticipated return b. Compute the anticipated return after financing costs with the most conservative asset-financing mix. Anticipated return c. Compute the anticipated return after financing costs with the two moderate approaches to the asset-financing mix.