Financial Management HW $4($week $7)$

Answer the following questions. Please show all steps of your work.

Percy Motors has a target capital structure of $40\%$ debt and $60\%$ equity. The yield to maturity

on the company's outstanding bonds is $9\%,$ and the tax rate is $40\%.$ Percy's CFO has

calculated the company's WACC as $9\mathrm{.}96\%.$ What is the company's cost of common equity?

Tunney Industries can issue preferred stock at a price of $$47\mathrm{.}5$ a share. The issue is

expected to pay a constant annual dividend of $$3\mathrm{.}80$ a share. What is company's cost of

preferred stock r$\_($p$)?$

J&S$\text{'}$s common stock is currently trading at $$30$ a share. The stock is expected to pay a

dividend of $$3\mathrm{.}00$ a share at the end of the year $($ D$\_(1)=$$$3\mathrm{.}00),$ and the dividend is expected to

grow at a constant rate of $5\%$ a year. If the company were to issue external equity, it would incur

a $10\%$ flotation cost. What are the costs of internal and external equity?

Evan company's next expected dividend, D$\_(1)$ is $$3\mathrm{.}18$; its growth rate is $6\%$; and the stock now

sells for $$36.$ New stock $($external equity$)$ can be sold to net the firm $$32\mathrm{.}4$ per share.

A$.$ What is firm's percentage flotation cost?

B$.$ What is firm's cost of new common stock?

CAPITAL BUDGETING CRITERIA A firm with a $14\%$ WACC is evaluating two projects

for this year's capital budget. After$-$tax cash flows are as follows:

Calculate NPV$,$ IRR, MIRR, payback, and discounted payback for each project.

Assuming the projects are independent, which one$($s$)$ would you recommend?

If the projects are mutually exclusive, which would you recommend?