A frrm is thinking of irvesting in Projects A and B. The data for each project is given belowf Project A: Initial investment - PHP 1,000,000; Cash flow for Year 1 - PhP, 200,000; Cash flow for Year 2 - PHP 100,000; Cash flow for Year 3 - PHP 150,000; Cash flow for Year A= PHP 300,000 ; Cach flow for Year 5 - PHP 500,000 Project B: Initial tenvestment = PHP 1,000,000, Cash flow for Year 1 - PHP 95,000 ; Cash flow for Year 2 = PHP 150,000 , Cash flow for Year 3 - PHP 195,000; Cash flow for Year 4 = PHP 475,000 , Cash flow for Year 5 - PHP 340,000. The cost of capital is 6.75%. Eased on the internal rate of return (1RR). which projectid should be accepted? ProjectA Profect is Projoct A and Project B Neither Project A nos Praject a The market values of a firm's balance sheet accounts are as follows: assets =9HP.10,000,000; lonteterm debt = PHP 2,800,000; preferred stock = PHP 3,400,000: and comenon equity - PHP 3,800,000. The before- lax cost of long -term debt = 12%, the cost of preferred stock- 14%, and the cost of commen equity - 23%. The tax rate is 35N. Find the weichted average cost of capital (WACC). 10sm 14.839 15.6180 Determine which investments should be accepted given the following data: Investment U: IRR =20%, Initial Investment = PHP 1.0 million Investment V: IRR - 23%, Initial Investment = PHP 2.5 million Investment W: IRR =21%, Initial investment = PHP 1.5 million Investment X:IRR=24%, Initiat investment = PHP 3.0 million Investment Y: IRR = 22\%. Initial Investment = PHP 2.0 million Investment ZZIRR - 2.5%, tnitial investment = PHP 2.5 million Welghted average cost of capital (WACC) / weighted marginal cost of capital (WMCC). If the firm requires total new financing of PHP 0 to PHP 5 million * 21.5% if the furm requires total new fnancing of more than PHP 5 million to PHP 10 million - 22.5% if the firm requires total new financing of more than PHP 10 milion 23.5 v1,W1,Yand an V1XiYi and 2 V,xi and z All lituritments should be sccepted A firm will sell 12-year, PHP 1,000 par value, 20% p a. coupon interest bonds for PHP. 925. Flotation costs afe 7% of the bond's par value. The tax rate is 35%. Determine the after-tax cost of debt. 19.49 14.79% 1486% 229 A firm's stock is presently priced at PHP 120 prer share. Its most recent dividend was PHP 7.50 per share. The dividend growth rate is 9%6. The firm projects that it will receive PHP 109 per share after underpriding and flotation costs on a new issuance of shares. Solve for the cost of new common stock. 1525 15.48% 16.50% Given: Market price per share i PHP 100, dividend growth rate =16%, projected dividend per share (for next year) = PHP 4 , 50, underpricing per share = PHP 4. Notation cost per share = PHP 1.50, Compute for the cost of retained earnings, 4,76% 20.5008 2068% 20.76K A firm's preferred stock has a par value of PHP 50 per share and a dividend of 5% p.a. It was able to selli each share for PHP 47 . Additionally, the firm paid flotation costs of PHP 4 per share. Find the cost of the security. 5 .00h 5325 547s 5.814 The T-bill rate is 3.0 percent and the risk premium is 6.5 percent. What is the required return? 7.5% 8.0% 9.5% 10.0%
