What is the project''s mirr

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Reference no: EM134465

Question

Hamilton Company's 8% coupon bonds which mature in 20 years as well as make quarterly payments, currently sell at a price of $686.86.

The company's tax rate is 40%.

What is Hamilton's after-tax cost of debt?

Billick Brothers is estimating its WACC.
Its capital structure consists of 40% debt and 60% common equity.
The company has 20-year bonds unpaid with a 9% annual coupon that are trading at par.
The company's tax rate is 40%.
The risk-free rate is 5.5% the market risk premium is 5.0% and the stock's beta is 1.4.
What is the company's WACC?

Flaherty Electric has 20M shares of common stock with a book value of $6 per share. They trade on the NYSE at $12 per share. The year-end dividend (D1) is probable to be 25¢ per share and the dividend is expected to grow forever at a constant rate of 7% per year.

It as well has 1M preferred shares that pay a dividend of 58¢/quarter as well as trade at $35 per share.

The company's long-term bonds which have a book value of $25M have a before-tax yield to maturity of 8.4%.

The company's tax rate is 40%.

What is the company's weighted average cost of capital?

you plan to introduce a fresh computerized cash register system at Seattle's Best's stores. There are two systems accessible. One has a low up-front cost however is less able to track inventory, and will therefore require more labour expenses at the warehouse. The other has a higher up-front cost however is directly connected to the warehouse as well as will thus reduce supply costs. At what cost of capital would the two projects have the same NPV?

Project A Project B

Year Cash Flow Cash Flow
0 -$100,000 -$200,000
1 $25,000 $50,000
2 $25,000 $50,000
3 $50,000 $80,000
4 $50,000 $100,000

Seattle's Best is considering renovating as well as renting (for 5 years) a run-down restaurant in a bad area of town (location A). You spot an substitute location (location B) in an upscale suburb. The cost of remodelling there is slightly higher however you anticipate that sales will be better throughout the 5-year rental agreement.

Location A
CF0 = -$1,000,000; CF1-5 = $400,000
Location B
CF0 = -$2,000,000; CF1-5 = $669,000
Your cost of capital is 10%. What is each project's NPV?
The projects are mutually exclusive. How much shareholder value would be lost if you were to select the project having the higher IRR?

Arrington Motors is considering a project with the following cash flows-
Time Period Cash Flow
0 -$200
1 $120
2 -$50
3 $700

The project has a WACC of 12%. What is the project's MIRR?

Alaska Salmon, Inc. has a new automated production line project it is considering. The project has a cost of $275,000 and is expected to provide after-tax annual cash flows of $73,306 for 8 years. The firm's management is uncomfortable with the IRR reinvestment assumption and prefers the modified IRR approach. You have calculated a cost of capital for the firm of 12%. What is the project's MIRR?

Reference no: EM134465

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