What discount rate should the firm use for project

Assignment Help Financial Management
Reference no: EM131921719

Gnomes R Us is considering a new project. The company has a debt–equity ratio of .88. The company’s cost of equity is 14.8 percent, and the aftertax cost of debt is 8.1 percent. The firm feels that the project is riskier than the company as a whole and that it should use an adjustment factor of +2 percent. What is the company’s WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) WACC % What discount rate should the firm use for the project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Project discount rate %

Reference no: EM131921719

Questions Cloud

What is the price per share of the company stock : The company’s WACC is 8.2 percent and the tax rate is 40 percent. What is the price per share of the company's stock?
Cost of equity using dividend growth model method : Calculate the cost of equity using the dividend growth model method.
What should management be doing to protect their employees : What are the management implications of this case? What should management be doing to protect their employees?
Maximum cost company would be willing to pay for project : What is the maximum cost the company would be willing to pay for this project?
What discount rate should the firm use for project : What discount rate should the firm use for the project?
What is the price per share of the company stock : The company’s WACC is 8.8 percent and the tax rate is 40 percent. What is the price per share of the company's stock?
What is the effective rate for three-month bills : What is the discount amount for 3-month bills? What is the effective rate for 3-month bills?
Because financing is part of company ongoing daily business : Because this financing is part of the company’s ongoing daily business, the company assigns it a cost that is the same as the overall firm WACC.
What four things did you notice about rose : Where is the setting? What two things did you notice about the setting? What three things did you notice about Troy?

Reviews

Write a Review

Financial Management Questions & Answers

  What was the return of the stock market that day

The index closed at 18,565.54, which was up 143.40 that day. What was the return (in percent) of the stock market that day?

  Dividend constant growth method

Eureka Gold Mining, Co. has 2,000,000 shares of common stock, currently trading at $50/share. The common stock of Eureka Gold Mining, Co. is expected to pay a dividend next year of $5.00/share, and it has a Beta calculated at 1.8. It also has 120,000..

  Calculate the maximum and minimum effective price

Identify which currencies have gained in value against the US dollar (USD) over the previous year. Explain your selection - Calculate the cross exchange rate between British Pounds (GBP) and Roubles (RUB).

  Define the bond-treasury-note-par value and coupon rate

Define each of the following, bond, treasury, note, risk free rate of return, par value, coupon rate, coupon payment, period coupon payment,

  What is the APR on this loan and What is the EAR

You have just purchased a new warehouse. To finance the purchase, you've arranged for a 30-year mortgage loan for 80 percent of the $2,300,000 purchase price. The monthly payment on this loan will be $15,000. What is the APR on this loan? What is the..

  What is the stocks expected rate of return

Managed Healthcare's current stock price is $25, its next per share dividend (assumed to be paid annually) is forecasted to be $1.00, and analysts expect the company to grow at a constant annual rate of 10 percent. What is the stock's expected rate o..

  What is the roe and what is the roa

Wakers, Inc., has sales of $35 million, total assets of $28 million, and total debt of $9 million. What is the ROE? What is the ROA?

  Find the ROI foe the five year venture

Find the ROI for the following 5-year venture. Interest is compounded quarterly. Draw the net worth diagram that shows the net worth at each year.

  What is formula to determine the effective interest rate

What is the formula to determine the effective interest rate if the discount is not utilized?

  Chief elements of apple overall competitive strategy

What are the chief elements of Apple’s overall competitive strategy? How well do the pieces fit together? Is the strategy evolving?

  What is the effective annual cost of trade credit

Pets Store Inc. sells on terms of 2/10, net 35. What is the effective annual cost of trade credit under these terms? Use a 365-day year.

  Calculate the value of the american call option

Calculate the value of the American call option. Write down the put-call parity relationship for this option.

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