Equity Information == 7 billion shares, Beta = 1.37, Market risk premium = 10.5%, Risk-free rate...

 

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Equity Information == 7 billion shares, Beta = 1.37, Market risk premium = 10.5%, Risk-free rate = 6.5% Debt Information $3 billion in outstanding debt (face value), Face value = 1300, Current Price = 850, Coupon rate = 7%, annually coupons, 8 years to maturity, Tax rate = 19% a) Calculate the WACC. b) If the equity financing is decreased by 25% and debt financing is increased by 15% then find the WACC. Furthermore what is the impact of increase in debt financing on WACC? Question No. 2 Company ABC is considering a project that will cost $580,000. The project will generate future cash flows $310,000 for 2 years at the rate of 8%. Value of Debt is $9 Billion and Equity is $6 Billion. The flotation cost for equity is 8%, and the flotation cost for debt is 6%. What is the NPV for the project after adjusting the flotation costs? Will you accept or reject the project? Equity Information == 7 billion shares, Beta = 1.37, Market risk premium = 10.5%, Risk-free rate = 6.5% Debt Information $3 billion in outstanding debt (face value), Face value = 1300, Current Price = 850, Coupon rate = 7%, annually coupons, 8 years to maturity, Tax rate = 19% a) Calculate the WACC. b) If the equity financing is decreased by 25% and debt financing is increased by 15% then find the WACC. Furthermore what is the impact of increase in debt financing on WACC? Question No. 2 Company ABC is considering a project that will cost $580,000. The project will generate future cash flows $310,000 for 2 years at the rate of 8%. Value of Debt is $9 Billion and Equity is $6 Billion. The flotation cost for equity is 8%, and the flotation cost for debt is 6%. What is the NPV for the project after adjusting the flotation costs? Will you accept or reject the project?

Answer rating: 100% (QA)

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