MKS Corporation had the following figures: -Interest rate on loan is 15% -Tax Rate is 25%...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
MKS Corporation had the following figures: -Interest rate on loan is 15% -Tax Rate is 25% -Total Debt outstanding is $2,000,000 -Number of Preferred stocks is 100,000 shares of $10 par value for which dividend rate is 16% -Number of common stocks is 3,000,000 shares of $1 par value -Risk-free rate of return is 14% -Beta for the company is 1.2 -Average Market return is 24% The company is evaluating three projects; M, K & S that are expected to generate the following: Year M K S 0 (700,000) (700,000) (700,000) 1 280,000 170,000 230,000 2 250,000 200,000 230,000 3 200,000 240,000 230,000 4 140,000 250,000 230,000 5 90,000 280,000 230,000 Required: A) Calculate the Weighted Average Cost of Capital B) Using payback, discounted payback, and net present value techniques, which project would you recommend, if any? MKS Corporation had the following figures: -Interest rate on loan is 15% -Tax Rate is 25% -Total Debt outstanding is $2,000,000 -Number of Preferred stocks is 100,000 shares of $10 par value for which dividend rate is 16% -Number of common stocks is 3,000,000 shares of $1 par value -Risk-free rate of return is 14% -Beta for the company is 1.2 -Average Market return is 24% The company is evaluating three projects; M, K & S that are expected to generate the following: Year M K S 0 (700,000) (700,000) (700,000) 1 280,000 170,000 230,000 2 250,000 200,000 230,000 3 200,000 240,000 230,000 4 140,000 250,000 230,000 5 90,000 280,000 230,000 Required: A) Calculate the Weighted Average Cost of Capital B) Using payback, discounted payback, and net present value techniques, which project would you recommend, if any?
Expert Answer:
Related Book For
Fundamentals of Financial Accounting
ISBN: 978-0078025372
4th edition
Authors: Fred Phillips, Robert Libby, Patricia Libby
Posted Date:
Students also viewed these accounting questions
-
On July 1, 2011, Davidson Corporation had the following capital structure: Common stock (par $3) ..... $600,000 Capital in excess of par ...... 900,000 Retained earnings ......... 700,000 Treasury...
-
On July 1, 2009, Jones Corporation had the following capital structure: Common stock (par $3) ..... $600,000 Capital in excess of par .... 900,000 Retained earnings ....... 700,000 Treasury stock,...
-
On July 1, 2014, Davidson Corporation had the following capital structure: Common stock (par $1) ... $600,000 Capital in excess of par ... 900,000 Retained earnings ...... 700,000 Treasury stock...
-
On December 31, 2021, Tiny Tims Tech, Inc. a private company who follows ASPE, leased a colour copier from Cory Copy Corporation at a price of $479,079. The lease agreement specifies annual payments...
-
DAT, Inc., produces digital audiotapes to be used in the consumer audio division. DAT lacks sufficient personnel in its inventory supply section to closely control each item stocked, so it has asked...
-
Investment activity is driven by both rational value-maximization and behavioral influences on the part of managers. Discuss.
-
In a set of 12 matched pairs, the mean difference was d = 18 and the standard deviation of the differences was sd = 4. Find the value of the test statistic for testing H0: d = 15 versus H1: d > 15....
-
Mr. Bates is creating a college fund for his daughter. He will put in $850 at the end of each year for the next 15 years. He expects to earn 6.35% annually. How much money will his daughter have in...
-
Samson's wages are $100,000. He lives in Maryland and his expenses include $25,000 mortgage interest, $12,000 other living expenses, $27,000 income tax, $6,200 payroll tax and $5,500 property tax....
-
In March 2020, the management team of Londonderry Air (LA) met to discuss a proposal to purchase five shorthaul aircraft at a total cost of $25 million. There was general enthusiasm for the...
-
Simplify algebraically. 3(+)-5(u-v) 11.Write the true bearing 310 as a quadrant bearing.
-
Crane Corporation's accounting records show the following at year-end December 31, 2022: Purchase Discounts Freight-In $7,450 Beginning Inventory $32,420 9,800 Ending Inventory 28,670 Freight-Out...
-
Barry Profit Corp.'s expected year-end dividend is $1.50, its required return is 12%, and their growth rate is 6%. What is Barry Profit's expected stock price in 8 years?
-
Finer Company uses a sales journal, purchases journal, cash receipts journal, cash payments journal, and general journal. Identify the journal in which each of the transactions should be recorded....
-
Compare two movies--such as Dangerous Minds and The Breakfast Club--that offer distinctly different portrayals of juvenile delinquency. Discuss their similarities and differences, and how they both...
-
Mercury Company has only one inventory pool. On December 31, 2024, Mercury adopted the dollar-value LIFO inventory method. The inventory on that date using the dollar-value LIFO method was $203,000....
-
Explain the process of using data analysis during the Plan Project Management process (please note that data gathering and data analysis are two of the tools and techniques that the PMBOK Guide...
-
4. Jobe dy -Y 2 et by
-
The following is a list of account titles and amounts (in millions) reported at December 26, 2010, by Hasbro, Inc., a leading manufacturer of games, toys, and interactive entertainment software for...
-
On January 1, 2013, the records of Tasty Treats Corporation (TTC) showed the following regarding production equipment: Equipment (estimated residual value, $4,000) ........................ $16,000...
-
For each of the following independent situations, prepare journal entries to record the initial transaction on December 31 and the adjustment required on January 31. a. Magnificent Magazines received...
-
In your year-end audit of The Joshua Redman Co., a defense contractor specializing in building sophisticated tracking systerns for missile defense systems, you bring in a specialist, Mal Waldron, to...
-
Specialists may be required to perform audit tasks that require knowledge or skills outside the auditor's abilities. Examples from the text include an engineer (to verify the stage of completion of...
-
Consider the internal audit staffs of the following two companies: Carl Company's internal auditors are college graduates who have been hired mostly from the ranks of marketing personnel who did not...
Study smarter with the SolutionInn App