ACME Commercial Real Estate is thinking of purchasing an office building in Austin Texas. ACME is...
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ACME Commercial Real Estate is thinking of purchasing an office building in Austin Texas. ACME is a publicly traded company that has a Market Capitalization of 225,000,000 and Debt of 120,000,000. ACME's Interest expense per year is 5,300,000 and ACME's corporate tax rate is 25%. ACME's cost of equity is 7.8% as calculated from the CAPM formula. What is ACME's WACC? The office building is 28,000,000 and ACME believes that the office building can be sold conservatively for 38,000,000 after 10 years. Meanwhile, they project the building's cash flow of the next 10 years are as follows. Year What is the NPV of this investment What is the IRR of this investment 2 1,300,000.00 1,380,000.00 1,550,000.00 4 5 6 8 9 1,790,000.00 1,970,000.00 2,080,000.00 2,130,000.00 2,240,000.00 2,300,000.00 10 2,390,000.00 ACME Commercial Real Estate is thinking of purchasing an office building in Austin Texas. ACME is a publicly traded company that has a Market Capitalization of 225,000,000 and Debt of 120,000,000. ACME's Interest expense per year is 5,300,000 and ACME's corporate tax rate is 25%. ACME's cost of equity is 7.8% as calculated from the CAPM formula. What is ACME's WACC? The office building is 28,000,000 and ACME believes that the office building can be sold conservatively for 38,000,000 after 10 years. Meanwhile, they project the building's cash flow of the next 10 years are as follows. Year What is the NPV of this investment What is the IRR of this investment 2 1,300,000.00 1,380,000.00 1,550,000.00 4 5 6 8 9 1,790,000.00 1,970,000.00 2,080,000.00 2,130,000.00 2,240,000.00 2,300,000.00 10 2,390,000.00
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Answer rating: 100% (QA)
To calculate ACMEs WACC we need to use the following formula WACC EV x Re DV x Rd x 1 Tc Where E mar... View the full answer
Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
Posted Date:
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