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Question: Puppet Masters is considering a new capital investment project. The company has an optimal structure and plans to maintain it. The yield to maturity on Puppet Masters' debt is 10%, and its tax rate is 35%. The market price of the new issue of preferred stock is $25 per share, with and expected per share dividend of $2 at the end of this year. Flotation costs are set at $1 per share. The new issue of common stock has a current market price of $140 per share, with an expected dividend in one year of $5. Flotation costs for issuing new common stock are $4 per share. Puppet Masters' dividends are growing at 10% per year, and this growth is expected to continue for the foreseeable future. Selected figures from last year's balance sheet follow:
Total Assets $ 1,000,000
Long-Term Debt 300,000
Preferred Stock 100,000
Common Stock 600,000
Calculate the minimum expected return from the new capital investment project needed to satisfy The minimum expected rate= WACC Weighted Average Cost of capital.
Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..
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