Wacc-uses only debt and common equity

Assignment Help Financial Management
Reference no: EM131615728

WACC

Empire Electric Company (EEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate of rd = 9% as long as it finances at its target capital structure, which calls for 30% debt and 70% common equity. Its last dividend (D0) was $2.30, its expected constant growth rate is 5%, and its common stock sells for $24. EEC's tax rate is 40%. Two projects are available: Project A has a rate of return of 13%, and Project B's return is 11%. These two projects are equally risky and about as risky as the firm's existing assets.

What is its cost of common equity? Round your answer to two decimal places. Do not round your intermediate calculations.

%

What is the WACC? Round your answer to two decimal places. Do not round your intermediate calculations.

%

Which projects should Empire accept?

Reference no: EM131615728

Questions Cloud

Wacc and percentage of debt financing : Hook Industries' capital structure consists solely of debt and common equity. What percentage of the company's capital structure consists of debt?
What is your initial reaction regarding this new project : What is your initial reaction regarding this new project. Do you believe the results of the scenario analysis?
What is your estimate of callahan cost of common equity : Using the DCF approach, what is its cost of common equity? what is your estimate of Callahan's cost of common equity?
Take only one of the two projects listed : Your firm has decided that it would like to take only one of two projects listed below. If your firm's cost of capital is 15%, which project should be taken?
Wacc-uses only debt and common equity : Empire Electric Company (EEC) uses only debt and common equity. What is its cost of common equity? What is the WACC?
What is the nov for the project : What is the NOV for the project? Should we accept or reject this project?
Determine the enterprise value of cool shoes : Cool Shoes (CS) had 2014 sales of $518 million. You expect sales to grow at 9% next year(2015), Using the DCF method, determine the enterprise value of CS.
What is the cost of issuing new preferred stock : The optimal capital structure of the company is 30% debt, 10% preferred stock and 60% equity. What is the cost of issuing new preferred stock?
Different levels of systematic risk : Two stocks with the same expected cash flow one period from today (after which both stocks will be worthless) of 100$ have different levels of systematic risk.

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd