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Sunny Day Manufacturing Company is considering Investing in a one-year project that requires an initial investment of $500,000. To do so, will have to issue new common stock and will incur a Notation cost of 2.00%. At the end of the year, the project is expected to produce a cash intow of $550,000. The rate of return that Sunny Day expects to earn on its project (net of its flotation costs) is 7.84% (rounded to two decimal places) White Lion Homebuilders has a current stock price of $33.35 per share, and is expected to pay a pershare dividend of $2.03 at the end of the year. The company's earnings and dividends' growth rate are expected to grow at the constant rate of 5.204 into the foreseeable future. It White Lion expects to incur Notation costs of 5.00% of the value of its newly-raised equity funds, then the flotation-adjusted (net) cost of its new common stock (rounded to two decimal places) should be Sunny Day Manufacturing Company Co.'s addition to earnings for this year is expected to be $420,000. Its target capital structure consists of 50% debt, 5% preferred, and 45% equity. Determine Sunny Day Manufacturing Company's retained carnings breakpoint: $1,120,000 $1,026,666 $933,333 $980,000 SSN 27: The Cost of Capital Tumbullco. has a target capital structure of 58% debt, 69 preferred stock, and 36% common equity. It has a before-tax cost of debt of 8.2%, and Its cost of preferred stockis 9.3% If Turnbull can raise all of its equity capital from retained earnings, its cost of common equity will be 12.4%. However, it is necessary to raise new common equity, it will carry a cost of 14.2% If its current tax rate is 25%, how much higher will turnbull's weighted average cost of capital (WACC) be of it has to raise additional common equity capital by issuing new common stock instead of raising the funds through retained earnings? (Note: Round your Intermediate calculations to two decimal places.) O 0.85% O 0.81 0.72% 0 0.65% Tumbull co. is considering a project that requires an initial investment of $270,000. The firm will raise the $270,000 in capital by issuing $100,000 of debt at a before-tax cost of 10.2%, $30,000 of preferred stock at a cost of 11.4%, and $140,000 of equity at a cost of 14.3%. The firm faces a tax rate of 25%. What will be the WACC for this project? (Note: Round your intermediate calculations to three decimal places.) Consider the case of Kuhn Co. Kuhn Co. is considering a new project that will require an initial Investment of $20 million. It has a target capital structure of 45% debt, 4% preferred stock, and 51% common equity, Kuhn has noncallable bonds outstanding that mature in five years with a face value of $1,000, an annual coupon rate of 10%, and a market price of $1,090.76. The yield on the company's current bonds is a good approximation of the yield on any new bonds that it issues. The company can sell shares of preferred stock that pay an annual dividend of 89 at a price of $95.70 per share. Kuhn does not have any retained earings available to finance this project, so the form will have to issue new common stock to help fund it. Its common stock is currently selling for $22.35 per share, and it is expected to pay a dividend of $2.78 at the end of next year. Flotation costs will represent 3% of the funds raised by issuing new common stock. The company is projected to grow at a constant rate of 9.2%, and they face a tax rate of 25% What will be the WACC for this project? (Note: Round your intermediate calculations to two decimal places)
