The initial financing of the project will be carried out as follows:- 55% equity and 45% debt. The company paid $1.50 per share in the form of dividend this year, which is likely to increase at a rate of 3% per year for the near future. The current price of the company's stock is $9.50 per share. The bank loan is likely to be arranged at an interest rate of 13.5% p.a.

You are required to: 

1. Compute the appropriate rate for discounting the cash flows of the project - 5 marks 

2. Compute the initial investment required - 4 marks 

3. Compute the earnings before taxes for years 1 through 7 - 5 marks 

4. Compute the earnings after taxes for years 1 through 7 - 1 mark 5. Compute the OCF for years 1 through 7 - 1 mark 6. Compute the Terminal cash flow - 3 marks 7. Compute the FCF for years 1 through 7 - 1 mark 8. Compute the NPV and IRR - 4 marks 9. Should the project be accepted? - 1 mark

Answer rating: 100% (QA)

Okay here are the calculations 1 WACC 55 135 45 95 12175 rounded to 122 2 Initial invest... View the full answer