Question: Need help finding the WACC and PV. The question can be found in the attachment. Question 14 Nally, Inc., is considering a project that will
Need help finding the WACC and PV. The question can be found in the attachment.

Question 14 Nally, Inc., is considering a project that will result in initial aftertax cash savings of $5.6 million at the end of the first year, and these savings will grow at a rate of 3 percent per year indefinitely. The firm has a target debt-equity ratio of .55, a cost of equity of 13 percent, and an aftertax cost of debt of 6.4 percent. The cost-saving proposal is somewhat riskier than the usual project the firm undertakes; management uses the subjective approach and applies an adjustment factor of +1 percent to the cost of capital for such risky projects. Requirement 1: Calculate the WACC. (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) WACC n/r % Requirement 2: What is the maximum cost Nally would be willing to pay for this project? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Present value $ n/r
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
