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Barton Industries expects that its target capital structure for raising funds in the future for its capital budget will consist of 40% debt, 5% preferred stock, and 55% common equity. Note that the firm's marginal tax rate is 40%. Assume that the firm's cost of debt, r_d, is 7%, the firm's cost of preferred stock, r_p, is 6.5% and the firm's cost of equity is 11% for old equity, r_s, and 11.31% for new equity, r_e. What is the firm's weighted average cost of capital (WACC_1) if it uses retained earnings as its source of common equity? Round your answer to 3 decimal places. Do not round intermediate calculations. % What is the firm's weighted average cost of capital (WACC_2) if it has to issue new common stock? Round your answer to 3 decimal places. Do not round intermediate calculations. %
Your firm is contemplating the purchase of a new $545,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $53,000 at the end of that time. You will save $295,000 before..
Your company manufactures sports equipment. You are considering replacing a brand of golf clubs with a new line of golf clubs. which of the following is not considered to be an incremental cash flow in your capitol budgeting analysis?
Calculate EMC's estimated value of operations
Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.79 million. The fixed asset falls into the three-year MACRS class. The project is estimated to generate $2,110,000 in ..
ABC has been considering two mutually exclusive projects with the following NPVs and project lives.
Dealers trade from their own inventory. Brokers earns a profit on the bid-ask spread.
How can a company use licensing agreements to enter world markets? What two fundamental product strategies do companies choose between when selling their products in the global marketplace?
Ang Electronics, Inc., has developed a new DVDR. If the DVDR is successful, the present value of the payoff (when the product is brought to market) is $33.6 million. If the DVDR fails, the present value of the payoff is $11.6 million. Calculate the N..
Use the following returns for X and Y. Returns Year X Y 1 21.7 % 26.1 % 2 – 16.7 – 3.7 3 9.7 28.1 4 19.4 – 14.4 5 4.7 32.1 Requirement 1: Calculate the variances for X and Y. Calculate the standard deviations for X and Y.
An investor owns $10,000 of Adobe Systems stock, $15,000 of Dow Chemical, and $25,000 of Office Depot. What are the portfolio weights of each stock? a. Adobe Systems = 0.3333, Dow Chemical = 0.3333, Office Depot = 0.3333. b. Adobe Systems = 0.2, Dow ..
Determine the value of a $1,000 denomination Fulton bond as of April 15, 2010 to an investor who holds the bond until maturity and whose required rate of return is
A design-build-operate engineering company in Texas that owns a sizable amount of land plans to lease the drilling rights (oil and gas only) to a mining and exploration company. Utilize engineering economy relations by hand and by spreadsheet to dete..
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