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"Since East Coast Yachts is producing at full capacity, Larissa has decided to have Dan examine the feasibility of a new manufacturing plant. This expansion would represent a major capital outlay for the company. A preliminary analysis of the project has been conducted at a cost of $1.2million. This analysis determined that the new plant will require an immediate outlay of $40million and an additional outlay of $20milllion in one year. The company has received a special tax dispensation that will allow the building and equipment to be depreciated on a 20-year MACRS schedule. Because of the time necessary to build the new plant, no sales will be possible for the next year. Two years from now, the company will have partial-year sales of $10million. Sales in the following four years will be $26million, $33million, $38million, and $40million. Because the new plant will be more efficient than East Coast Yachts's current manufacturing facilities, variable costs are expected to be 60 percent of sales, and fixed costs will be $2million per year. The new plant will also require net working capital amounting to 8 percent of sales. Dan realizes that sales from the new plant will continue into the indefinite future. Because of this, he believes the cash flow after Year 5 will continue to grow at 4 percent indefinitely. The company's tax rate is 40 percent and the required return is 11 percent. Larissa would like Dan to analyze the financial viability of the new plant and calculate the profitability index, NPV, and IRR. Also, Larissa has instructed Dan to disregard the value of the land that the new plant will require. East Coast Yachts already owns it, and, as a practical matter, it will simply go unused indefinitely. She has asked Dan to discuss this issue in his report.
a.) What is the after-tax cost of debt? b.) What is the cost of preferred stock? c.) What is the cost of common stock? d.) What is the firm's weighted-average cost of capital?
The firm is considering using this machine in a new project. If it does so, what value should be assigned to this machine and included in the initial costs of the new project?
the fair view golf amp country club details the following accounts in its financial statements.abaccounts
for johnmark1900 can you assist me with the following question you are currently thinking about investing in a stock
Solve for the future value given these assumptions
Describe and discuss the concepts of federal deficit and the national debt. How statistically significant are they for the United States as compared to other countries? Discuss how the deficits and debt arise.
Corporations must identify its capital needs prior to assessing appropriate capital structure. The next step is for the firm to undertake all considerations in finishing necessary analysis to ensure its capital structure is suitable.
Last year Wei Guan corporation had $350 million of sales, and it had $270 million of fixed assets that were used at 65 percent of capacity. In millions, by how much could Wei Guan's sales raise.
ICU Window, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with seven years to maturity that is quoted at 114 percent of face value. The issue makes semiannual payments and has an coupon rate of 9.8 percent an..
Define and discuss the importance of the time value of money concepts including compounding (future value), discounting (present value), and annuities. Why do organization leaders need to understand these concepts?
The deal structure includes the assumption of a $500.0 bond issue that matures in 2018, with a stated coupon rate of 5.5% and a current yield of 3.45%. It is anticipated the equity issue will be 100.0 shares.
You reflect on these choices as well as other actions that could be taken. Describe the various actions that you might take and their implications.
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