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2 part question pls help! The Phillips Company is considering increasing its headphone production capacity to fulfill a large private contract. The CFO has tasked
2 part question pls help!
The Phillips Company is considering increasing its headphone production capacity to fulfill a large private contract. The CFO has tasked her finance staff to analyze the project and make a recommendation to the executive team to be included at next month's board meeting. The CFO provides the following information to the analyst: COST OF CAPITAL Phillips' current capital structure is comprised of $450,000,000 in debt, $300,000,000 in preferred equity, and $200,000,000 in common equity. Phillips currently has issued bonds that mature in 10 years with a coupon rate of 3% and a current market price of $845. Preferred shares of Phillips are trading at $16/ share and pay an annual dividend of $0.85/ share. Common stock of Phillips has a beta of 1.6 and trades at $60 /share. The 10 -year US treasury yield is 3.0%. The market risk premium is estimated at 9.25%. Their tax rate is 35%. Round answers to four decimal places (ie .1125 or 11.25\%) - What is the current cost of Phillips debt capital? - What is the current cost of Phillips preferred equity capital? - What is the current cost of Phillips common equity capital (using CAPM)? - What is Phillips Weight Averaged Cost of Capital? Philips expects to invest $26,000,000 in new/plant equipment. The contract will last for 10 years, at which point it expects its plant equipment to have a salvage value of $12,000,000. They plan to finance this project using 40% debt and 60% equity. Their investment banker advises there are transaction costs of 3.75% on debt and 11.0% on equity. Phillips expects to increase its accounts receivable by $7,500,000, its inventory by $3,000,000, and its accounts payable by $0,000,000. It expects to sell 50,000 units at a price of $315/ unit, with variable cost per unit of $200. It expects additional operating costs each year of $550,000. Phillips tax rate is 35%. - What is the annual depreciation for the fixed assets of this project? - What is the firm's weighted average flotation cost? (round to four decimal places) - What is the firm's flotation adjusted Initial Capital Expenditure? (round to nearest $100,000 ) - What is the projected Cash flow at Year 0? (round to nearest $100,000 ) - What is expected Cash flow Year 1-9? (round to nearest \$100,000) - What is the expected Cash Flow of Year 10 ? (round to nearest $100,000 ) - What is the project's Net Present Value? - What is the project's Internal Rate of Return? - What is Phillips Accounting Break-even unit sales level? - What is Phillips Cash Break-even unit sales level? The Phillips Company is considering increasing its headphone production capacity to fulfill a large private contract. The CFO has tasked her finance staff to analyze the project and make a recommendation to the executive team to be included at next month's board meeting. The CFO provides the following information to the analyst: COST OF CAPITAL Phillips' current capital structure is comprised of $450,000,000 in debt, $300,000,000 in preferred equity, and $200,000,000 in common equity. Phillips currently has issued bonds that mature in 10 years with a coupon rate of 3% and a current market price of $845. Preferred shares of Phillips are trading at $16/ share and pay an annual dividend of $0.85/ share. Common stock of Phillips has a beta of 1.6 and trades at $60 /share. The 10 -year US treasury yield is 3.0%. The market risk premium is estimated at 9.25%. Their tax rate is 35%. Round answers to four decimal places (ie .1125 or 11.25\%) - What is the current cost of Phillips debt capital? - What is the current cost of Phillips preferred equity capital? - What is the current cost of Phillips common equity capital (using CAPM)? - What is Phillips Weight Averaged Cost of Capital? Philips expects to invest $26,000,000 in new/plant equipment. The contract will last for 10 years, at which point it expects its plant equipment to have a salvage value of $12,000,000. They plan to finance this project using 40% debt and 60% equity. Their investment banker advises there are transaction costs of 3.75% on debt and 11.0% on equity. Phillips expects to increase its accounts receivable by $7,500,000, its inventory by $3,000,000, and its accounts payable by $0,000,000. It expects to sell 50,000 units at a price of $315/ unit, with variable cost per unit of $200. It expects additional operating costs each year of $550,000. Phillips tax rate is 35%. - What is the annual depreciation for the fixed assets of this project? - What is the firm's weighted average flotation cost? (round to four decimal places) - What is the firm's flotation adjusted Initial Capital Expenditure? (round to nearest $100,000 ) - What is the projected Cash flow at Year 0? (round to nearest $100,000 ) - What is expected Cash flow Year 1-9? (round to nearest \$100,000) - What is the expected Cash Flow of Year 10 ? (round to nearest $100,000 ) - What is the project's Net Present Value? - What is the project's Internal Rate of Return? - What is Phillips Accounting Break-even unit sales level? - What is Phillips Cash Break-even unit sales level
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