Solution-Additional debt at the current rate

Additional debt at the current rate

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Reference no: EM133060311

You have the following projects to consider

Project	Cost ($thousands)	NPV	IRR
A	$300	280	33%
B	$4,200	1775	14.2%
C	$6,300	1800	10.6%
D	$2,000	175	9.6%

Right now your debt rate is 6.3% and makes up 45% of the company capital structure with a tax rate of 30%. Equity is at 13.7% and makes up the rest of the capital structure. What will be the cost of capital for each project individually if you want to maintain the current capital structure, but the rates work as follows; we have $1.45 million in internal equity to use, if we go beyond that limit our equity rate goes to 15.1%. We can raise additional debt at the current rate up to $750 thousand. After that it goes to 6.7% and if we raise more than $2.5 million in debt it goes to 7.5%. Which projects should we do?

Reference no: EM133060311

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Additional debt at the current rate

Reference no: EM133060311

Reference no: EM133060311

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