Stackhouse Industries has a new project available that requires an initial investment of $4.5 million. The project will provide unlevered cash flows of $675,000 per year for the next 20 years. The company will finance the project with a debt-to-value ratio of .40. The company’s bonds have a YTM of 6.8 percent. The companies with operations comparable to this project have unlevered betas of 1.15, 1.08, 1.30, and 1.25. The risk-free rate is 3.8 percent, and the market risk premium is 7 percent. The company has a tax rate of 34 percent. What is the NPV of this project?
Answer to relevant QuestionsSeger, Inc., is an unlevered firm with expected annual earnings before taxes of $21 million in perpetuity. The current required return on the firm’s equity is 16 percent, and the firm distributes all of its earnings as ...It is sometimes suggested that firms should follow a “residual” dividend policy. With such a policy, the main idea is that a firm should focus on meeting its investment needs and maintaining its desired debt−equity ...In spite of the theoretical argument that dividend policy should be irrelevant, the fact remains that many investors like high dividends. If this preference exists, a firm can boost its share price by increasing its dividend ...The company with the common equity accounts shown here has declared a stock dividend of 15 percent when the market value of its stock is $45 per share. What effects on the equity accounts will the distribution of the stock ...What are the possible reasons why the stock price typically drops on the announcement of a seasoned new equity issue?
Post your question