Minimum expected return from new capital investment project

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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.

Reference no: EM131464472

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