Question: Please help on this. I am struggling in this class. A. compute the comspanies WACC B.compute the initial investment outlay at year 0 C. The
You must analyze a potential new product. The A 8 . D department of Cori Materials has developed. You must analyze a potential new product. The R \& D department of Cori Materials has developed a caulking compound for use in residential construction. Cori's marketing manager believes that the company can sell 115,000 tubes of the compound per year for 3 years at a price of $3.25 each. After 3 years, they believe the product would be obsolete. The purchase price of the required equipment would be $175,000, and the equipment is eligible for 100% bonus depreciation. The product would require an investment in net operating working capital of $20,000 up front, and this would be returned at the end of the project. The variable cost per unit is $1.95, and the fixed costs would be $70,000 per year. At the end of the 3rd year, the equipment could be sold for $15,000. Cori's tax rate is 25%. They estimate that bonds could be issued with a yield of 6%. The company does not use preferred stock. The company expects to use 40% debt and 60% equity and the equity can be provided completely through the use of retained earnings. Cori just paid a dividend of $3.00 per share and the dividends are expected to grow at a rate of 5% per year. The stock is currently selling for $30.50. The company has a beta of 1.34, the risk free rate is 5%, and the expected return on the market is 12%
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