What is firm market capitalization-cost of preferred stock

Assignment Help Financial Management

Reference no: EM131531042

A firm has a Capital Structure as follows: Market Value of their debt Is $2,000,000, a Preferred stock is $1,000,000. There are 500,000 shares of stock outstanding, with a market value of $20 per share.

The preferred stock price is $50 and pays a $4 dividend. The common stock sells for $20 and pays a $1.00 dividend that is expected to grow by 2% per year. The bonds currently sell for $818, and the coupon rate of 5%. The bonds will mature in 10 years. The firm’s tax rate is 40%.

The company generates $10,000,000 is sales, expenses are $6,000,000. The initial investment of $1,000,000 is depreciated straight-line over 10 years.

What is the firm’s Market Capitalization?

What is the cost of the preferred stock?

What is the cost of the common stock?

What is the cost of the bonds?

What is the firm’s WACC?

What is the OCF____________?

Based on their Initial investment $1,000,000, what is the NPV of this 10- year project using the firm’s WACC that you calculated in #5 ______________?

Based on their Initial investment $1,000,000, what is the IRR of this 10- year project using the firm’s WACC, that you calculated in #5 ______________?

Would you invest in this project? __________.

Explain why_________________.

Reference no: EM131531042

Questions Cloud

Calculate the accounting break-even point : We are evaluating a project that costs $832,000, has an eight-year life, and has no salvage value. Calculate the accounting break-even point.

Elements of richard branson leadership style : Assess the key elements of Richard Branson's leadership style and the impact that those elements have had on his business success.

Compare and contrast the difference between stocks and bonds : The value of a bond is dependent primarily on two factors. Name and explain these factors. Compare and contrast the differences between stocks and bonds.

Explain the meaning and significance of each of given terms : Write a subroutine to sort an array of N 8-bit elements into descending order. On entry to the subroutine, A2 contains the first (i.e., lowest) address.

What is firm market capitalization-cost of preferred stock : What is the firm’s Market Capitalization? What is the cost of the preferred stock? What is the cost of the common stock?

Display desserts in restaurants : To display desserts in restaurants, Mario Sclafani ordered refrigeration units from Felix Storch, Inc. Felix faxed a credit application to Sclafani.

Design a subroutine to display the ascii character : A memory-mapped VDT displays the 1024 8-bit characters starting at $00 F000 on a CRT terminal as 16 lines of 64 characters.

Purpose of assignment : In business, understanding the role of the manager in an organization is fundamental for employees.

What is the expected return of the portfolio : Your portfolio is invested 28 percent each in A and C and 44 percent in B. What is the expected return of the portfolio?

User Account

All Pages