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A firm has the following capital structure: 1 . Bonds with market value of $ 2 , 0 0 0 , 0 0 0 2
A firm has the following capital structure:
Bonds with market value of $
Preferred Stock with a market value of $
Common stock, of which shares is outstanding. Presently, each common stock is selling at $ per share
The preferred stock price per share is $ and pays a $
dividend. Common stock shares sell for $ and pay a $ dividend. Dividends for common stock are expected to grow by Bond price is $ and the bond coupon rate is The bonds mature in years.
The firms tax rate is The company has $ in sales, and expenses of $ The initial investment of $ will be depreciated straightline over years. The project is expected to last years.
What is the firms Weighted Average Cost of Capital WACC
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What is the firms Operating Cash Flow OCF
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Using your computed WACC compute the NPVuse the answer from question above and OCF use the answer from question above
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Based on your answer to question # would you accept or reject the project? Explain why?
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