Calculate: (40 pts) Required returns, market values of stock and bond, WACC, NPV and IRR if...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Calculate: (40 pts) Required returns, market values of stock and bond, WACC, NPV and IRR if Risk free rate is 2%; Return to market portfolio is 11% Beta of debt is .3; Beta of preferred stock is 1.2; Beta of COMMON stock is 2.2 Optimal capital structure is 45% common stock, 5% pfd, and 50% bonds Marginal tax rate is 21 %; Firm's common stock pays a $3 dividend and grows at 9% The preferred stock pays a $5 dividend Firm issues bonds with 15 year maturity and 6% coupon, semiannual interest Project has $4,200,000 Initial Cost Outlay and a 5 year life. The cash flows are: $2,300,000 yr1; $2,100,000 yr 2: $800,000 yr 3; $700,000 yr 4 and $500,000 yr 5. Accept or Reject ??? Calculate: (40 pts) Required returns, market values of stock and bond, WACC, NPV and IRR if Risk free rate is 2%; Return to market portfolio is 11% Beta of debt is .3; Beta of preferred stock is 1.2; Beta of COMMON stock is 2.2 Optimal capital structure is 45% common stock, 5% pfd, and 50% bonds Marginal tax rate is 21 %; Firm's common stock pays a $3 dividend and grows at 9% The preferred stock pays a $5 dividend Firm issues bonds with 15 year maturity and 6% coupon, semiannual interest Project has $4,200,000 Initial Cost Outlay and a 5 year life. The cash flows are: $2,300,000 yr1; $2,100,000 yr 2: $800,000 yr 3; $700,000 yr 4 and $500,000 yr 5. Accept or Reject ???
Expert Answer:
Answer rating: 100% (QA)
rD rF betaDErM rF 2 0311 2 2 27 47 rP rF betaPErM rF 2 1211 2 2 108 128 rE rF ... View the full answer
Related Book For
Financial management theory and practice
ISBN: 978-0324422696
12th Edition
Authors: Eugene F. Brigham and Michael C. Ehrhardt
Posted Date:
Students also viewed these finance questions
-
The risk free rate is 7%, the return in the market is 10%, and the beta is 1.30. What return must you receive to be satisfied that you are being fairly compensated for the risk of the firm?
-
Suppose beta is 1.2, risk free rate is 1%, market risk premium is 4%, before tax cost of debt is 30%, tax rate is 20%, and the firm's debt to equity is 70%, what is WACC?
-
Suppose beta is 1.2, risk free rate is 3%, market risk premium is 5%, before tax cost of debt is 6%, tax rate is 40%, and the firm's debt to equity ratio is 0.5, what is WACC?
-
Steam leaves a nozzle with a pressure of 500 kPa, a temperature of 350C, and a velocity of 250 m/s. What is the isentropic stagnation pressure and temperature?
-
On June 30, 2014, the balances of the accounts appearing in the ledger of Simkins Company are as follows: Instructions 1. Does Simkins Company use a periodic or perpetual inventory system? Explain....
-
Compute the following quantity using MATLAB in the Command Window: \[B=\frac{\tan x+\sin 2 x}{\cos x}+\log \left|x^{5}-x^{2} ight|+\cosh x-2 \tanh x\] for $x=5 \pi / 6$.
-
Discuss the personnel and sound practices aspects of an internal control environment that relate to cash receipts transactions.
-
Due to the poor quality of various semiconductor products used in their manufacturing process, Microlaboratories has decided to develop a QC program. Because the semiconductor parts they get from...
-
1 You're the chief financial officer (CFO) of Worldwide Widget Manufacturing, Inc. The company manufactures and sells widgets at factories in the United States and internationally. Listed below are...
-
The MFG Corporation is planning to produce and market three different products. Let x1, x2, and x3 denote the number of units of the three respective products to be produced. The preliminary...
-
A Pelton wheel having a mean bucket diameter of10 m is running at 1000 r.p.m. The net head on the Pelton wheel is 700 m. If the side clearance angle is 15 and discharges through the nozzle is01 m3/s,...
-
Overview In this assignment, you will gain experience in modifying the Document Object Model (DOM) and adding new nodes to existing DOM nodes. The user will be prompted to enter their name and three...
-
Need help with btSpellCheck. I get error message on if (!dictionary.contains(key)) { package application; import java.io.File; import java.io.FileNotFoundException; import java.io.IOException;...
-
George Moosin is a commissioned salesperson who regularly conducts his work away from his employer's place of business. In 2021, George earned a gross salary of $150,000 and commission income of...
-
Who is the intended target audience? 2) What messages in the advertisement are conveyed? 3) What elements of the advertisement are most closely linked to the target audience? 4) If the advertisement...
-
Styles Voice Part 1: 1. Create a Java project named Lab28A. 2. Create a secondary class for something that you will instantiate objects from. We have made Employee, Student, Customer, Gadget, etc....
-
For his International Marketing course, Ivan must write a mock letter introducing his company to a potential international client. He must present his company's core values, as well as the services...
-
Heineken N.V., a global brewer based in the Netherlands, reports the following balance sheet accounts for the year ended December 31, 2016 (euros in millions). Prepare the balance sheet for this...
-
How does the equation for valuing a bond change if semiannual payments are made? Find the value of a 10-year, semiannual payment, 10 percent coupon bond if nominal rd = 13%. MINI CASE Sam Struthers...
-
Hastings estimates that if it acquires Vandell, interest payments will be $1,500,000 per year for 3 years after which the current target capital structure of 30 percent debt will be maintained....
-
Suppose you have the following historical returns for the stock market and for another company, P.Q. Unlimited. Explain how to calculate beta, and use the historical stock returns to calculate the...
-
How does the product life cycle influence marketing strategy decisions?
-
What are the stages in the product life cycle?
-
What is the difference between secondary demand and primary demand?
Study smarter with the SolutionInn App