Question: A-Use the table for the question(s) below. Consider the information for the following four firms: Firm Cash Debt Equity rD rE c Eenie $0 $150
A-Use the table for the question(s) below. Consider the information for the following four firms:
| Firm | Cash | Debt | Equity | rD | rE | c |
| Eenie | $0 | $150 | $150 | 5% | 10% | 21% |
| Meenie | $0 | $250 | $750 | 6% | 12% | 21% |
| Minie | $25 | $175 | $325 | 6% | 11% | 21% |
| Moe | $50 | $350 | $150 | 7.50% | 15% | 21% |
The weighted average cost of capital for "Minie" is closest to:
1-9.50%
2-6.75%
3-9.00%
4-8.25% ( This Option is Already Incorrect )
B-Use the information for the question(s) below. Omicron Industries' Market Value Balance Sheet ($ Millions) and Cost of Capital
| Assets | Liabilities | Cost of Capital | |||||
| Cash | 0 | Debt | 200 | Debt | 6% | ||
| Other Assets | 500 | Equity | 300 | Equity | 12% | ||
| c | 21% |
Omicron Industries' New Project Free Cash Flows (Millions)
| Year | 0 | 1 | 2 | 3 |
| Free Cash Flows | ($100) | $40 | $50 | $60 |
Assume that this new project is of average risk for Omicron and that the firm wants to hold constant its debt to equity ratio. The NPV for Omicron's new project is closest to:
1-28.75 million
2-23.75 million ( This Option is Already Incorrect)
3-24.75 million
4-27.50 million
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