A travel agency needs to know if any of the projects shown in table 1 are...

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A travel agency needs to know if any of the projects shown in table 1 are acceptable and why. Its capital structure is: 0.60 Equity and 0.40 Liabilities. You have the following information. ● ● ● ● ● New stock can be issued and sold at its market price. You can get as much as $300,000. Issuing cost is $1.0 per share. You can get a loan from bank Graphs of $50,000, paying an interest of 15%. You can issue bonds, total amount $250,000 with a coupon of 9%. More new stock could be issued; issuing cost would be $2.0. You can get a loan from bank Battery, paying an interest of 12%. Tax rate is 30%. Share's market price is $20; last dividend was paid 2 months ago, it was $1.25 per share. It is expected to have a steady growth rate of 7%. Project Asia Oceania Africa Europe Table 1 Initial Investment 250,000 300,000 250,000 275,000 IRR 12.50% 14.00% 12.00% 11.00% A travel agency needs to know if any of the projects shown in table 1 are acceptable and why. Its capital structure is: 0.60 Equity and 0.40 Liabilities. You have the following information. ● ● ● ● ● New stock can be issued and sold at its market price. You can get as much as $300,000. Issuing cost is $1.0 per share. You can get a loan from bank Graphs of $50,000, paying an interest of 15%. You can issue bonds, total amount $250,000 with a coupon of 9%. More new stock could be issued; issuing cost would be $2.0. You can get a loan from bank Battery, paying an interest of 12%. Tax rate is 30%. Share's market price is $20; last dividend was paid 2 months ago, it was $1.25 per share. It is expected to have a steady growth rate of 7%. Project Asia Oceania Africa Europe Table 1 Initial Investment 250,000 300,000 250,000 275,000 IRR 12.50% 14.00% 12.00% 11.00%

Answer rating: 100% (QA)

To determine if any of the projects are acceptable for the travel agency we need to calculate the cost of capital and compare it with the internal rate of return IRR of each project If the IRR of a pr... View the full answer