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A company has two divisions, A and B. Division A is the company's low risk division and would have a WACC of 8% if it were operated as an independent company. Division B is the company's high risk division and would have a WACC of 14% if it were operated as an independent company. Because the two divisions are the same size, the company has composite of WACC of 11%. Division B is considering a new project with an expected return of 12%.
1. Should company accept or reject the project?Accept or Reject2. On what grounds do you base you accept or reject decision?A. Division B's project should be rejected, because its return is less thant the risk based cost of capital for the division.B. Division B's project should be accepted, because its return is greater than the risk based-based cost of capital for the division.
Income from a precious metals mining operation has been decreasing uniformly for five years. If income in year one was $100,000 and it decreased by $10,000 per year through year five,
Dexter's. has net income of $11,000, interest of $480, cost of goods sold of $31,500, and depreciation of $900. What is the times interest earned ratio if the tax rate is 35 percent?
In 2008, Pfizer had 12,000 million shares of common stock authorized, 8,863 million in issue, and 6,746 million outstanding. Calculate the par value of each share.
Your Corporation stock sells for $50 per share, its last dividend was $2.00, its growth rate is a constant 5%, and the firm will incur a floating rate cost of 15% if it sells new stock.
Recall that this step determines the amount that could be deposited today, to satisfy the education funding need
Prepare an amortization table and assume that a full month's interest must be paid for the first month and that payments begin February 1st compute two years of mortgage payments.
Compute the implicit cost of carrying an ounce of gold and the implied storage cost per ounce of gold if the current spot price of gold per ounce is $425.00,
Swimkids is a swimsuit manufacturer. They sell swim suits at a selling price is $30 per unit. Swimkids variable costs are $18 per unit. Fixed costs are $86,500. Swimkids expects sales of $265,300 next year. What is Swimkids's margin of safety?
What are the advantages and disadvantages to a U.S. corporation which employs currency options on euros rather than a forward contract on euros to hedge its exposure in euros?
Speculating with Currency Futures: Assume that a March futures contract on the Mexican Peso was available in January for $.09 per unit. Also assume that forward contracts were available for the same settlement date at a price of $0.092 per peso.
The semi-annual interest payments that corporate bonds in the U.S. typically pay are conventionally referred to as
The CFO estimates that a proposed expansion would require an investment of $6.8 million. What is the WACC for the last dollar raised to complete the expansion?
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