User Account

All Pages

Weighted average cost of capital

Assignment Help Finance Basics
Reference no: EM131725623

Please help with explanation ASAP.

1. You are offered an investment with returns of $ 1,065 in year 1, $ 3,512 in year 2, and $ 3,077 in year 3. The investment will cost you $ 5,989 today. If the appropriate Cost of Capital (quoted interest rate) is 8.8 %, what is the Profitability Index of the investment?

2. A company has determined that its optimal capital structure consists of 40 percent debt and 60 percent equity. Given the following information, calculate the firm's weighted average cost of capital. Cost of Debt = 5.8%, Tax rate = 40%, Current Stock Price = $25.10, Long Run Growth rate = 3.5%, Next Year's Dividend = $2.47.

Reference no: EM131725623

Questions Cloud

Starting one month from today : How much money will you have to deposit each month into an account earning 8% per year (interest compounded monthly), starting one month from today
Discuss the lifo method of valuing inventories : We used the LIFO method of valuing our inventories for approximately 50% and 53% of total inventories at June 30, 2007 and 2006, respectively.
Pay per share for the stock : If you require a 15% rate of return, how much will you be willing to pay per share for the stock when you can afford to make this investment?
Executive and legislative federal branches of government : Provide a case study paper, which examines the process of the shared powers between the executive and legislative federal branches of government as it relates
Weighted average cost of capital : A company has determined that its optimal capital structure consists of 40 percent debt and 60 percent equity. Given the following information
Dividend every year for the time being : How much are you willing to pay for one share of this stock is you want to earn a 14.5% annual return?
How you think sustainability efforts by walmart will impact : How do you think sustainability efforts by Walmart will impact the larger logistics industry? How this program of companies encouraging their people?
Develop two proposals in different professional settings : Explain how you would feel about being diagnosed by a doctor who could be hundreds or thousands of miles from you.
What is the crossover rate : These projects are mutually exclusive, equally risky, and not repeatable. The cost of capital is 10%, and the IRR is 10.53%. What's the crossover rate (if any).

Reviews

Write a Review

Finance Basics Questions & Answers

  Describe what we mean by posting

Describe the events that correspond to the following transactions.

  The required rate of return on these projects is 11 what is

yearnbspnbsp project anbspnbspnbspnbspnbsp nbspnbsp project bnbsp 0nbspnbspnbspnbsp -1000000nbspnbspnbsp -100000nbsp 1

  Question 1 two friends joe and bill both have carpentry

question 1 two friends joe and bill both have carpentry skills and decide to go into business as partners together

  What is the debt ratio after the change in structure

What is the market value of the firm (equity plus debt) after the change in capital structure? d. What is the debt ratio after the change in structure? e. Who (if anyone) gains or loses?

  What methods do financial analysts use to value merger

What methods do financial analysts use to value merger candidates? What are the limitations of each method?

  What are the firm roe and roic

Its notes payable equals $23,000, long-term debt equals $75,000, and common equity equals $240,000. The firm finances with only debt and common equity, so it has no preferred stock. What are the firm's ROE and ROIC?

  How much money will it have given years from now

(Compounding and annuities due) 7 years ago Alfa Bank invested $1,000,000 at a 5 percent annual interest rate. If the bank invests an additional $20,000 a year.

  List the various types of ird assets

Is a Roth IRA considered income in Respect of a Decedent (IRD)? Please explain

  What are the possible reasons for ipo underpricing

How does a rights offering differ from a shelf offering? - What are the possible reasons for IPO underpricing? -What is the empirical evidence on the long-run performance of IPOs?

  Explain why it is necessary to understand the time value

explain why it is necessary to understand the time value of money. give some examples of how you would use the concept

  Stock before and after the proposed restructuring

Leo Hoops Inc., is currently an all-equity firm. It has 10,000 shares outstanding that sell for $20 each. The firm has an operating income of $30,000 and pays no taxes. The firm contemplates a restructuring that would issue $50,000 in 8% debt ..

  Estimate the free cash flow to the firm in particular year

Union Pacific Railroad reported net income of $770 million in 1993, after interest expenses of $320 million. (The corporate tax rate was 36%).

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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