What debt-equity ratio is needed for the firm

Reference no: EM13276013

Carson Electronics uses 70 percent common stock and 30 percent debt to finance its operations. The aftertax cost of debt is 5.4 percent and the cost of equity is 15.4 percent. Management is considering a project that will produce a cash inflow of $36,000 in the first year. The cash inflows will then grow at 3 percent per year forever. What is the maximum amount the firm can initially invest in this project to avoid a negative net present value for the project? Central Systems, Inc. desires a weighted average cost of capital of 8 percent. The firm has an aftertax cost of debt of 5.4 percent and a cost of equity of 15.2 percent. What debt-equity ratio is needed for the firm to achieve its targeted weighted average cost of capital?

Reference no: EM13276013

Questions Cloud

What would be the cost of external equity : Messman Manufacturing will issue common stock to the public for $30. The expected dividend and growth in dividends are $2.25 per share and 3%, respectively.

What rate of growth must be expected for spencer : Spencer Supplies' stock is currently selling for $60 a share. The firm is expected to earn $5.40 per share this year and to pay a year-end dividend of $3.70.

What is the capacitance of the configuration : Consider a hollow cylinder with a length L along the z-axis and a radius R and a charge -Q, containing a wire also of length L and charge Q running co-axially to the cylinder at its center.

Define all the symmetry planes in the staggered conformation : Describe all the symmetry planes in the staggered conformation of ethane. Draw a figure and arrows to show any rotational symmetry axes in the staggered conformation of ethane.

What debt-equity ratio is needed for the firm : What debt-equity ratio is needed for the firm to achieve its targeted weighted average cost of capital?

How far vertically has an electron traveled : An electron is traveling horizontally along the positive x-axis at a speed 3.00 x 106 m/s. After it passes the origin, it enters a constant E field with a strength of 200 N/C and directed 45 degrees up from the x-axis.

What annual rate of return would she have earned : Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Design system should be smart enough to decide winner team : write a programe capable of winner team. the system must incoporate the score of each players and number of overs played.designed system must be efficent enough to keep track of extras,no balls,byes,legbyes.

What is the value of the stock today : What is the value of the stock today? 4. Would today's stock value be affected by the length of time you intend to hold the stock?

User Account

All Pages