finance task

Project Description:

i need it done in 4 hours or less.

the pattilli corporation, a large manufaturer or electrical parts,including transformers switches and circuit breakers,is currently developing its financial planning for next the next couple of weeks at the next board of directors meeting,dilo michado, chief financial officer is scheduled to present recommendations for next year's overall financial plan.he has asked anton lastic,manager of financial planning, to gather the necessary infomarion and perform the calculations and prepare discussions for the financial plan.

the company's divisional staffs, together with corporate finance department personnel, have analyzed several proposed capital expenditure projects.the following is a summary schedule of acceptable projects (defined by the company as projects.the following is a summary schedule of acceptable projects (defined by the company as projects having internal rates of return greater than 8 percent).

project investment amount ($) internal rate of retur(irr)
a $10 m 25%
b 20 21
c 30 18
d 35 15
e 40 12.4
f 40 11.3
g 40 10
h 20 9

all projects are expected to have one year of negative cash flows followed by positive cash flows over the remaining addition, next year's projects involve modifications and expansion of the company's existing facilities and a result,these projects are considered to have approximately the same degree of risk as the company's existing assets.

lastic feels that this summary schedule and detailed supporting documents provide him with the necessary information concerning the possible capital expenditure projects for next year.he now can direct his attention to obtaining the data necessary to determine the cost of the capital required to finance the next year's proposed projects.

the company's investment bankers indicated to michado in a recent meeting that they feel the company could issue up to $50 million of 9 percent first mortgage bonds at par next year.the investment bankers also feel that any additional debt would have to be subordinated debentures with a coupon of 10 percent,also to be sold at par.the investment bankers rendered this opinion after michado gave an approximate estimate of the size of next year's capital budget, and after he estimated that approximately $100 million of retained earnings would be available next year.

both the company's financial managers and its investment bankers consider the present capital structure of the company,shown in the following table, to be optional (assume the book and market values are equal ) :

debt $400,000,000
stockholder's equity :
common stock 150,000,000
retained earnings 450,000,000

lastic has gathered additional information that needs further analysis and discussion, as follows :
- pattilli's common stock is presently selling at $21 per share
-the investment bankers also have indicated that an additional $75 million in new common stock could be issued to net the company $19 per share.
-the company's present annual dividend is $1.32 per share.however, michado feels fairly certain that the board will increase it to $1.415 per share next year.
-the company's earnings and dividends have doubled over the past 10 years.growth has been fairly steady, and this rate is expected to continue for the forseeable future.the company's marginal tax rate is 40%.

using the information provided,answer the following questions (note :disregard deprecaition in this case.)
-calculate the after tax cost of each component source of capital.discuss.
-calculate the marginal cost of capital for the various increments or ''packages'' of capital the company can raise next year.plot the marginal cost of capital curve.
-using the marginal cost of capital curve from question 2,determine the company's optimal capital budget for the next year.discuss.
-should project g be accepted or rejected?discuss.
what factors do you feel might cause michado to reccomend a different capital budget than the one obtained in uestion 3?discuss.
assume a sudden rise in interest rates has caused the cost of various capital components to increase.the pretax cost of subordinated debentures has increased to 12.5 percent; the company's common stock price has to be declined to $18; and new stock could be sold to net pattilli $16 per share.

1. recompute the after-tax cost of the individual component soursces of capital
2. recompute the marginal cost capital budget for the various increments of capital pattili can raise next year.
3. determine the optimal capital budget for next year at the higher cost of capital.
4. how does teh interest rate surge affect pattilli's optimal capital budget? discuss.

.descirbe stock repurchases, stock dividends, and stock splits? include a discussion of the major advantages and disadvantages of each.
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Price Type: Fixed

Project Budget: $0 to $10
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