# Question

The Cook Company has the following target capital structure:

Debt ........... 30%

Common equity ....... 70

Total capital ........ 100%

For the coming year, management expects to realize net earnings of $250,000. The past dividend policy of paying out 50 percent of earnings will continue. Present commitments from its banker will allow Cook to borrow $100,000 at 10 percent.

The company's tax rate is 40 percent; the current market price of its stock is $39.96 per share; its last dividend as $1.85 per share; and the expected growth rate is 8 percent.

The firm has the following investment opportunities for the next period:

Management asks you to help them determine what projects (if any) should be undertaken. You proceed with this analysis by answering the following questions:

a. What is the weighted average cost of capital?

b. What are the IRR values for Projects?

c. Which projects should Cook's managementaccept?

Debt ........... 30%

Common equity ....... 70

Total capital ........ 100%

For the coming year, management expects to realize net earnings of $250,000. The past dividend policy of paying out 50 percent of earnings will continue. Present commitments from its banker will allow Cook to borrow $100,000 at 10 percent.

The company's tax rate is 40 percent; the current market price of its stock is $39.96 per share; its last dividend as $1.85 per share; and the expected growth rate is 8 percent.

The firm has the following investment opportunities for the next period:

Management asks you to help them determine what projects (if any) should be undertaken. You proceed with this analysis by answering the following questions:

a. What is the weighted average cost of capital?

b. What are the IRR values for Projects?

c. Which projects should Cook's managementaccept?

## Answer to relevant Questions

Benezra Enterprises, Inc. has a plant capacity that can produce 4,000 units annually. Its predicted operations for the year are:Sales (2,000 units at $50 each) $100,000Manufacturing costs: Variable ........ $15 per unitFixed ...Walter Adam is the manager of the Springs CafÃ©. The cafÃ© has decided to add pizza to its menu. The estimated equipment costs, incremental revenues from pizza sales, and incremental cash expenses related to the sales are as ...Christensen & Assoc. is developing an asset financing plan. Christensen has $1,000,000 in current assets, of which 15% are permanent, and $700,000 in fixed assets. The current long-term rate is 9%, and the current short-term ...The College Board reported that the mean score for the Critical Reading part of the SAT was 502. Assume that the population standard deviation of the score is Ïƒ = 100.What is the probability that a random sample of 90 test ...In an effort to become more efficient and build better supplier relations, your manager, Jane Furman, has examined the companyâ€™s current practice of using eight different suppliers for eight different items and considered ...Post your question

0