Question: hey can you hell me on these please USE THE FOLLOWING INFORMATION TO ANSWER 33-37 Dunaway Industries is evaluating the idea of expanding their production
USE THE FOLLOWING INFORMATION TO ANSWER 33-37 Dunaway Industries is evaluating the idea of expanding their production facility in Cobb County. The CFO gathered the following data. - Dunaway Industries spent $500,000 researching other sites for their expansion. - The equipment needed for the expansion will cost $25,800,000 fully installed. The equipment will be depreciated over 20 years to a salvage value of $1,000,000. Dunaway Industries uses straight-line depreciation. If Dunaway accepts the project, the company will sell the equipment for salvage value (i.e., $1,000,000 ) at the end of the life of the project. - If Dunaway Industries adds the new equipment, sales are expected to increase by $17,400,000 and costs are expected to increase by $10,000,000. - The appropriate tax rate for Dunaway Industries is 30% - The capital of the firm includes 75% of equity and 25% of debt. - Dunaway Industries recently issued a bond with 30 years to maturity that pays a coupon of 7.50% semiannually. The $1,000 par bond sold for $956.77. - The market believes that Dunaway Industries will pay a dividend of $2.42(D1=2.42) on their common stock next year and that the dividend will grow at 4.00% forever. The current stock price is $22.00. 33. What is the WACC of the firm? a. 12.18% b. 12.28% c. 12.65% d. 12.55% e. 12.88% 34. What is the depreciation expense per year created by the project? a. $2,720,000 b. $2,780,000 c. $1,240,000 d. $1,230,000 e. $1,220,000 35. What is the incremental cash flow per year of the project for year 1-19? a. $5,552,000 b. $5,900,000 c. $5,567,000 d. $5,549,000 e. $5,237,000
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