Calculate the wacc and irr, Financial Management

Assignment Help:

The capital structure of Wild West Inc. is as follows:

Debts: $5,000,000 (face value) bonds with coupon rate at 8.00% and current price at par
Preferred shares: $2,000,000 (face value) paying 5% dividends which is trading at 95 percent
Common shares: Current stock price at $5 per share with 1,000,000 shares issued and outstanding. The risk-free rate is 5%, the market risk premium is 6%, and the beta of Wild West Inc. is 1.15
Marginal tax rate is 40%

Show your calculation

a. Calculate the WACC for Wild West Inc.

b. Should Wild West Inc. accept an IRR of 7% new project which is of similar risk as all the existing projects of the Big Plan? Why and why not?

c. Should Wild West Inc. accept an IRR of 12% new project which is considered 30% higher in risk as compared with all the existing projects of the Big Plan? Why and why not?

Related Discussions:- Calculate the wacc and irr

Secondary market - t-bills, Secondary Market The major participants in ...

Secondary Market The major participants in secondary market are banks, brokerage firms and bond houses. They buy and sell T-bills on behalf of customers and themselves. The cus

Define risk relate with large amount of short term financing, What are the ...

What are the risks related with using a large amount of short-term financing for working capital? Using a large amount of short-term financing usually permits funds to be raised

Operation and productio management measure and compare, what that mean?

what that mean?

What is a marginal cost of capital schedule (mcc), What is a marginal cost ...

What is a marginal cost of capital schedule (MCC)? Is the schedule always a horizontal line? Explain. The marginal cost of capital schedule is a graphic representation of the

Determine about the strategic benchmarking, Determine about the Strategic B...

Determine about the Strategic Benchmarking Comparison in terms of an organisations 'strategic choices' made to the most successful market leader for example review organisat

Essentials of rating service, Critical investment decisions may be ta...

Critical investment decisions may be taken based on the ratings offered by the credit rating agency. In order to ensure that the rating leads to good investment d

Capital structure, name the concept which increases the return on equity sh...

name the concept which increases the return on equity shares by changing the capital structure of the co.

Explain the structure of financial systems, Explain the structure of financ...

Explain the structure of financial systems In direct finance borrower-spenders borrow funds straight from lenders in the financial markets by selling them securities. In indire

Panera bread company, Analysis of the financial statements and accounting p...

Analysis of the financial statements and accounting policies of "Panera" Bread company, in APA format, containing: Financial Statements -Discuss the main financial statemen

Orperating cycle, #discuss the applicability of an operating cycle in veget...

#discuss the applicability of an operating cycle in vegetable growing business in uganda..

Write Your Message!

Name

Email id

Message

Verfication Code

User Account

All Pages