What is the npv after the capital structure change

Assignment Help Financial Management
Reference no: EM131920781

Your boss is considering an investment in new manufacturing equipment. The equipment costs $270,000 and will provide annual after-tax inflows of $45,000 at the end of each of the next 7 years. The firm’s market value debt/equity ratio is 25%, its cost of equity is 17%, and its pretax cost of debt is 9%. The firm’s tax rate is 40%. Assume the project is of approximately the same risk as the firm’s existing operations.

What is the NPV after the capital structure change?

Reference no: EM131920781

Questions Cloud

Concerning business continuation agreement : Which of the following is not true concerning a business continuation agreement?
Determine equilibrium price : determine the equilibrium price of an XYZ 100 European call expiring at the end of the third period (n=3).
Life insurance proceeds would be paid to her estate : Sue’s stock would pass to her estate. Sue’s life insurance proceeds would be paid to her estate.
The case of the overseas suppliers : As you begin moving forward on your products, you are always on the lookout for high quality, organic, inexpensive herbs to include in your product.
What is the npv after the capital structure change : Your boss is considering an investment in new manufacturing equipment. What is the NPV after the capital structure change?
Tax-deductible fringe benefits : All of the following are tax-deductible fringe benefits a C corporation may provide to its shareholder-employees except?
Creates family limited partnership : Susan creates a family limited partnership in which she owns the general and limited partnership interests.
What is the company cost of equity : What is the company’s cost of equity? If the firm converts to 25% debt, what will its cost of equity be and WACC?
What is our dollar-based return on investment : You invest $5M in Mexico’s equity markets at the spot rate of MXP 20/$. What is our dollar-based return on investment?

Reviews

Write a Review

Financial Management Questions & Answers

  Advantages and disadvantages of interstate banking

What are the advantages and disadvantages of interstate banking? What has been the likely effect of the Gramm-Leach-Bliley Act on financial consolidation?

  Forecasting the income statement

Income Statement Hermann Industries is forecasting the following income statement: Sales $4,000,000 Operating costs excluding depreciation & amortization 2,200,000 EBITDA $1,800,000 Depreciation and amortization 320,000 EBIT $1,480,000 Interest 280,0..

  Firm is considering two mutually exclusive

Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 10 percent, and that the maximum allowable payback and discounted payba..

  Coupon rate and semi-annual payment

A company's 8% coupon rate, semi-annual payment, $1,000 par value bond that matures in 25 years sells at a price of $619.33. The company's federal-plus-state tax rate is 30%. What is the firm's after-tax component cost of debt for purposes of calcula..

  Describe relevant characteristics of small bank in depth

Describe a hypothetical, community bank with approximately 30 employees. The bank has only one location—a 2,800 square foot building located downtown housing their 30 employees. Describe the relevant characteristics of this small bank in depth. For t..

  What is the intrinsic value of this warrant

Quantum Inc. has warrants outstanding that allow the holder to purchase 1.5 shares of stock per warrant at $22 per share (exercise price). Thus each individual share can be purchased at $22 with the warrant. What is the intrinsic (minimum) value of t..

  What is the current price of the bond-bond price

Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 15 years to maturity, and a coupon r..

  What is the current yield of the bond today

What is the current yield of the bond today?

  Discuss economic aspects of foreign corrupt practices act

Discuss the economic aspects of the foreign corrupt practices act. What evidence is there on the economic affects of the act? How does the theory of finance illuminate payments to foreign officials as an investment? What is the significance of the Is..

  What is the difference in pv between two retirement option

What is the difference in PV between the two retirement options? Which retirement option will give you the greatest present value,

  What was the firm end-of-year cash balance

You have just been hired as a financial analyst for Basel Industries. What was the firm's end-of-year cash balance?

  Injuries sustained after freak street sweeper accident

You are serving on a jury. A plaintiff is suing the city for injuries sustained after a freak street sweeper accident. what is the size of the settlement?

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