Landman Corporation ( LC ) manufactures time series photographic equipment. It is currently at its target debt
Fantastic news! We've Found the answer you've been seeking!
Question:
Landman Corporation LC manufactures time series photographic equipment. It is currently at its target debtequity ratio of Its considering building a new $ million manufacturing facility. This new plant is expected to generate aftertax cash flows of $ million in perpetuity. The company raises all equity from outside financing. There are three financing options:
A new issue of common stock: The flotation costs of the new common stock would be percent of the amount raised. The required return on the companys new equity is percent.
A new issue of year bonds: The flotation costs of the new bonds would be percent of the proceeds. If the company issues these new bonds at an annual coupon rate of percent, they will sell at par.
Increased use of accounts payable financing: Because this financing is part of the companys ongoing daily business, it has no flotation costs and the company assigns it a cost that is the same as the overall firm WACC. Management has a target ratio of accounts payable to longterm debt of Assume there is no difference between the pretax and aftertax accounts payable costs.
What is the NPV of the new plant? Assume that LC has a percent tax rate. Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, eg
Posted Date: