Retlaw Corporation ( RC ) manufactures time - series photographic equipment. It is currently at its target
Fantastic news! We've Found the answer you've been seeking!
Question:
Retlaw Corporation RC manufactures timeseries photographic equipment. It is currently at its target debtequity ratio of Its considering building a new $ million manufacturing facility. This new plant is expected to generate aftertax cash flows of $ million in perpetuity. The company raises all equity from outside financing. There are three financing options:
A new issue of common stock: The flotation costs of the new common stock would be of the amount raised. The required return on the companys new equity is
A new issue of year bonds: The flotation costs of the new bonds would be of the proceeds. If the company issues these new bonds at an annual coupon rate of they will sell at par.
Increased use of accounts payable financing: Because this financing is part of the companys ongoing daily business, it has no flotation costs, and the company assigns it a cost that is the same as the overall firm WACC. Management has a target ratio of accounts payable to longterm debt of Assume there is no difference between the pretax and aftertax accounts payable cost.
What is the NPV of the new plant? Assume that RC has a tax rate. Enter the answer in dollars. Do not round intermediate calculations. Round the WACC percentage to decimal places. Round the final answer to decimal places. Omit $ sign in your response.
Posted Date: