Reference no: EM132803034
Questions -
Q1) Suppose a firm has 10.70 million shares of common stock outstanding at a price of $16.52 per share. The firm also has 246000.00 bonds outstanding with a current price of $1,194.00. The outstanding bonds have yield to maturity 6.24%. The firm's common stock beta is 1.785 and the corporate tax rate is 40.00%. The expected market return is 11.61% and the T-bill rate is 2.43%. Compute the following:
a) Weight of Equity of the firm
b) Weight of Debt of the firm
c) Cost of Equity of the firm
d) After Tax Cost of Debt of the firm
Q2) A firm has a WACC of 13.96% and is deciding between two mutually exclusive projects. Project A has an initial investment of $62.00. The additional cash flows for project A are: year 1 = $18.52, year 2 = $37.06, year 3 = $54.68. Project B has an initial investment of $70.53. The cash flows for project B are: year 1 = $57.66, year 2 = $49.97, year 3 = $26.34. Calculate the Following:
a) Payback Period for Project A:
b) Payback Period for Project B:
c) NPV for Project A:
d) NPV for Project B:
e) WACC for the Firm