You are planning to issue debt to finance a new project. The project will require $20.26...

  

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You are planning to issue debt to finance a new project. The project will require $20.26 million in financing and you estimate its NPV to be $15.492 million. The issue costs for the debt will be 3.2% of face value. Taking into account the costs of external financing, what is the NPV of the project? The new NPV will be $ (Round to the nearest dollar.) Avicorp has a $13.7 million debt issue outstanding, with a 6.1% coupon rate. The debt has semi-annual coupons, the next coupon is due in six months, and the debt matures in five years. It is currently priced at 94.71% of par a. What is Avicorp's pretax cost of debt? b. If Avicorp faces a 30% tax rate, what is its after-tax cost of debt? Note: Assume that the firm will always be able to utilize its full interest tax shield. a. The cost of debt is % per year. (Round to two decimal places.) Growth Company's current share price is $19.95 and it is expected to pay a $1.00 dividend per share next year. After that, the firm's dividends are expected to grow at a rate of 4.4% per year. a. What is an estimate of Growth Company's cost of equity? b. Growth Company also has preferred stock outstanding that pays a $2.00 per share fixed dividend. If this stock is currently priced at $27.85, what is Growth Company's cost of preferred stock? c. Growth Company has existing debt issued three years ago with a coupon rate of 6.2%. The firm just issued new debt at par with a coupon rate of 6.7%. What is Growth Company's pretax cost of debt? d. Growth Company has 5.4 million common shares outstanding and 1.4 million preferred shares outstanding, and its equity has a total book value of $50.2 million. Its liabilities have a market value of $19.6 million. If Growth Company's common and preferred shares are priced as in parts (a) and (b), what is the market value of Growth Company's assets? e. Growth Company faces a 22% tax rate. Given the information in parts (a) through (d), and your answers to those problems, what is Growth Company's WACC? Note: Assume that the firm will always be able to utilize its full interest tax shield. a. What is an estimate of Growth Company's cost of equity? The required return (cost of capital) of levered equity is%. (Round to two decimal places.) You are planning to issue debt to finance a new project. The project will require $20.26 million in financing and you estimate its NPV to be $15.492 million. The issue costs for the debt will be 3.2% of face value. Taking into account the costs of external financing, what is the NPV of the project? The new NPV will be $ (Round to the nearest dollar.) Avicorp has a $13.7 million debt issue outstanding, with a 6.1% coupon rate. The debt has semi-annual coupons, the next coupon is due in six months, and the debt matures in five years. It is currently priced at 94.71% of par a. What is Avicorp's pretax cost of debt? b. If Avicorp faces a 30% tax rate, what is its after-tax cost of debt? Note: Assume that the firm will always be able to utilize its full interest tax shield. a. The cost of debt is % per year. (Round to two decimal places.) Growth Company's current share price is $19.95 and it is expected to pay a $1.00 dividend per share next year. After that, the firm's dividends are expected to grow at a rate of 4.4% per year. a. What is an estimate of Growth Company's cost of equity? b. Growth Company also has preferred stock outstanding that pays a $2.00 per share fixed dividend. If this stock is currently priced at $27.85, what is Growth Company's cost of preferred stock? c. Growth Company has existing debt issued three years ago with a coupon rate of 6.2%. The firm just issued new debt at par with a coupon rate of 6.7%. What is Growth Company's pretax cost of debt? d. Growth Company has 5.4 million common shares outstanding and 1.4 million preferred shares outstanding, and its equity has a total book value of $50.2 million. Its liabilities have a market value of $19.6 million. If Growth Company's common and preferred shares are priced as in parts (a) and (b), what is the market value of Growth Company's assets? e. Growth Company faces a 22% tax rate. Given the information in parts (a) through (d), and your answers to those problems, what is Growth Company's WACC? Note: Assume that the firm will always be able to utilize its full interest tax shield. a. What is an estimate of Growth Company's cost of equity? The required return (cost of capital) of levered equity is%. (Round to two decimal places.)

Answer rating: 100% (QA)

To calculate the NPV of the project we need to consider the issue costs for the debt and the cost of external financing The new NPV will be calculated ... View the full answer