Reference no: EM131354434
Hankins, Inc., is considering a project that will result in initial aftertax cash savings of $6.2 million at the end of the first year, and these savings will grow at a rate of 3 percent per year indefinitely. The firm has a target debt–equity ratio of .61, a cost of equity of 13.1 percent, and an aftertax cost of debt of 5.6 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 +1 percent to the cost of capital for such risky projects.
Calculate the WACC. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) WACC 10.26 % ( I DID THIS PART )
What is the maximum cost the company would be willing to pay for this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Present value
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The firm has target debt–equity ratio
: Hankins, Inc., is considering a project that will result in initial aftertax cash savings of $6.2 million at the end of the first year, and these savings will grow at a rate of 3 percent per year indefinitely. The firm has a target debt–equity ratio ..
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What is maximum cost company would be willing to pay project
: Hankins, Inc., is considering a project that will result in initial aftertax cash savings of $6.2 million at the end of the first year, and these savings will grow at a rate of 3 percent per year indefinitely. What is the maximum cost the company wou..
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: Ward Corp. is expected to have an EBIT of $2,450,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $176,000, $107,000, and $126,000, respectively. All are expected to grow at 19 percent per year..
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