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A company that operates in the field of packaging agricultural items, is considering the possibility of expanding its production facilities through an investment with a

A company that operates in the field of packaging agricultural items, is considering the possibility of expanding its production facilities through an investment with a total cost of 800,000 euros. The characteristics of the financing scheme of the investment are presented as follows: a) 35% of the total investment cost comes from an increase in the share capital of the company. The share price today is 4 euros, the dividend for this year is 0.5 euros and the annual growth rate of these in perpetuity is estimated at 4%. The valuation model is that of constant dividend growth. We assume zero issuance costs for the specific source of funding. b) 40% of the total investment cost comes from a 5-year Bank Loan. The company will pay throughout the loan a fixed interest rate equal to 2% and a risk margin equal to 3%. c) the remaining 25% will come from the issuance of a 5-year bond loan, with a nominal bond value of 1,000 euros and an annual issue interest rate of 8%. At the time of issue, the bond price is traded at 97.5% of the nominal value. The tax rate of the company is 24%. i. Calculate the cost of the company's share capital assuming that the new investment belongs to the same risk category as the company's existing assets. (Scores 0.75) ii. To calculate the after-tax cost of bank lending as well as the issuance of the bond loan, assuming that the new investment belongs to the same risk category as the existing assets of the company. (Scores 1.0) iii. Considering that the new investment belongs to the same risk category as the existing assets of the company and that the market is in equilibrium, calculate the average Weighted Cost of Capital (M.S.K.K.) that the company will use for the evaluation. of the investment and evaluate it, if the Internal Rate of Return (EBA) of the investment is 11%.

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