What circumstances should the company take on project

Assignment Help Financial Management

Reference no: EM131937948

Hankins, Inc., is considering a project that will result in initial aftertax cash savings of $4.2 million at the end of the first year, and these savings will grow at a rate of 1.9 percent per year indefinitely. The firm has a target debt-equity ratio of .25, a cost of equity of 10.4 percent, and an aftertax cost of debt of 3.2 percent. The cost-saving proposal is somewhat riskier than the usual project the firm undertakes; management uses the subjective approach and applies an adjustment factor of +2 percent to the cost of capital for such risky projects. Under what circumstances should the company take on the project?

Reference no: EM131937948

Questions Cloud

Determining the psychologically disordered : Psychological disorders are often not apparent to others, and many people with these problems seem to live basically normal lives and are not a threat to others

What procedures would a cognitive therapist : What procedures would a cognitive therapist use to help your friend overcome his negative feelings?

International fisher effect : The Canadian three-month interest rate (unannualized) is 4%. Assume that you believe in International Fisher Effect (IFE).

Develop an annotated bibliography on contemporary approaches : Psy410 Bibliography Include 8-10 sources on contemporary approaches to treatment based on current research and theoretical models.

What circumstances should the company take on project : Under what circumstances should the company take on the project?

What a successful policy document might look like : Rather, it is designed merely to reflect what a successful policy document might look like in any given workplace.

Write compliance policy for an acute hospital in accordance : Write Compliance Policy for an acute hospital in Accordance with Clinical Coding Compliance and Indiana

What are the returns on funds invested for bill : What are the returns on funds invested for Bill and Erica respectively?

Describe piaget and kohlberg stages : Describe Piaget's and Kohlberg's stages of moral development. Give examples of each stage.

User Account

All Pages