Reference no: EM132645732
The stock of Matrix Computing sells for $65, and last year's dividend was $2.53. Security analysts are projecting that the common dividend will grow at a rate of 9% a year. A flotation cost of 12% would be required to issue new common stock. Matrix's preferred stock sells for $42.00, pays a dividend of $3.32 per share, and new preferred stock could be sold with a flotation cost of 10%. The firm has outstanding bonds with 25 years to maturity, a 15% annual coupon rate, semiannual payments, $1,000 par value. The bonds are trading at $1,271.59. The tax rate is 20%. The market risk premium is 5.5%, the risk-free rate is 7.0%, and Matrix's beta is 1.2. In its cost-of-capital calculations, Matrix uses a target capital structure with 40% debt, 10% preferred stock, and 50% common equity.
Problem a. Calculate the cost of each capital component-in other words, the after-tax cost of debt, the cost of preferred stock (including flotation costs), and the cost of equity (ignoring flotation costs). Use both the CAPM method and the dividend growth approach to find the cost of equity.
Problem b. Calculate the cost of new stock using the dividend growth approach.
Problem c. Assuming that Matrix will not issue new equity and will continue to use the same tar-get capital structure, what is the company's WACC
|
Calculate modified internal rate of return and npv
: Calculate each project's payback period, net present value (NPV), internal rate of return (IRR), modified internal rate of return (MIRR)
|
|
Absolutely essential to secure data present in database
: Considering the importance of data in organization, it is absolutely essential to secure the data present in the database.
|
|
Find the sensitivity of npv to changes in the sales price
: Now conduct a sensitivity analysis to determine the sensitivity of NPV to changes in the sales price, variable costs per unit, and number of units sold.
|
|
How the goals fit the smart model
: Using each part of the S.M.A.R.T goal acronym explain how the goals you have established for the client to fit the SMART model.
|
|
How do calculate the cost of each capital component
: Calculate the cost of each capital component-in other words, the after-tax cost of debt, the cost of preferred stock (including flotation costs)
|
|
Find what other types of financial statement
: How do determine if there is an issue you should be worried about? What other types of financial statements can you look at to see if there is an issue and why?
|
|
Implement to better learn and understand your data
: Why is it so important to know your data? Discuss some methods you would implement to better learn and understand your data.
|
|
What happens if carry value more than fair value
: If carry value is 105 000, fair value is 90 000, what is the difference? is possible to be negative value? Assume tax is 30%, what is the fair value?
|
|
Which project should be accepted if are independent and why
: Calculate each project's NPV, IRR, MIRR, payback, and discounted payback. Which project(s) should be accepted if they are independent?
|