User Account

All Pages

What is the NPV of the new plant

Assignment Help Accounting Basics
Reference no: EM132704591

Question - Photochronograph Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt-equity ratio of .85. It's considering building a new $62 million manufacturing facility. This new plant is expected to generate aftertax cash flows of $7.4 million in perpetuity. The company raises all equity from outside financing. There are three financing options:

1. A new issue of common stock: The flotation costs of the new common stock would be 6.9 percent of the amount raised. The required return on the company's new equity is 14 percent.

2. A new issue of 20-year bonds: The flotation costs of the new bonds would be 2.5 percent of the proceeds. If the company issues these new bonds at an annual coupon rate of 7 percent, they will sell at par.

3. Increased use of accounts payable financing: Because this financing is part of the company's ongoing daily business, it has no flotation costs, and the company assigns it a cost that is the same as the overall firm WACC. Management has a target ratio of accounts payable to long-term debt of .15. (Assume there is no difference between the pretax and after tax accounts payable cost.)

Required - What is the NPV of the new plant? Assume that PC has a 25 percent tax rate.

Reference no: EM132704591

Questions Cloud

Which is not excluded from the scope of aasb revenue : Which is NOT excluded from the scope of AASB 118 Revenue? Revenue arising from primary production activities. / Subscriptions.
What two conditions must be met before the allowance method : The allowance method of recognizing bad debt expense, What two conditions must be met before the allowance method can be used?
Discuss kato katz concentration technique : Discuss kato katz concentration technique for examining schistosome species
Discuss about day-to-day reality of juvenile justice system : The purpose of this assignment is to learn more about the day-to-day reality of the juvenile justice system (JJS). For this assignment, you will conduct.
What is the NPV of the new plant : The flotation costs of the new common stock would be 6.9 percent of the amount raised. What is the NPV of the new plant
Define relationship between the police and the community : Write about a particular strategy or strategies that can be used to improve police-community relations in the 21st century. An example is community-specific.
What portion of the profit or loss should allocated to Mary : The building is initially recorded on the partnership's books at Mary's book value (P228,000). What portion of the profit or loss should be allocated to Mary
What need to be done for jenny : Jenny is a 20 years old university student, unmarried and 8 weeks pregnant. She is a rather remarkable girl in that she lives independently while still
What did officer joseph do to change resident perception : What did Officer Joseph specifically do to change the resident's perception of him as "Robocop"? Do you think this style of policing can be done by all police.

Reviews

Write a Review

Accounting Basics Questions & Answers

  Below find the trial balance for nybrostrand company

below find the trial balance for nybrostrand company. prepare an income statement and balance sheet in good format.

  Unearned revenues rent on december

Unearned revenues rent. On December 1, 2013, an advance rent payment of $12,900, representing a three month prepayment for the months of December, January, and February, was received in cash from the company's tenant.

  Problem regarding the west nile virus

You are the director of communicable diseases in a city health department, responsible for a large urban community. It is early spring in 2003.

  Prepare supporting amortization of ECOBV schedule

Prepare supporting amortization of ECOBV schedule for 2020 and verify the equity in income balance for 2020, as reported on Large's separate income statement

  Find the entry to record the estimated warranty expense

During August, Boxer Company sells $356,000 in merchandise that has a one year warranty. Find the entry to record the estimated warranty expense for the month

  You are an accountant in a medium-sized manufacturing

you are an accountant in a medium-sized manufacturing company. you have been asked to mentor an accounting clerk who is

  Allocate manufacturing overhead cost

Allocate manufacturing overhead cost to each product line using the activity based costing approach recommended by the consultant

  Dapper corporation had only one job in process on may 1 the

dapper corporation had only one job in process on may 1. the job had been charged with 1010 of direct materials 3630 of

  If nanner implements a total quality management program and

naner corporation is trying to determine how long it takes for one product to pass through the production process. the

  Compare code of professional conduct for cpa to accountants

Compare the code of professional conduct for CPAs to the code of professional conduct for accountants who are non-CPAs. Next, determine the major ethical issues

  These costs include fixed costs of 800000 and variable

amazon beverages produces and bottles a line of soft drinks using exotic fruits from latin america and asia. the

  Discuss the relevant factors that should be considered

Amber Partnership, a general partnership, has many opportunities to use. Discuss the relevant factors that should be considered before making this election.

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd