ANSWER

(Divisional costs of capital and investment decisions) in May of this year Newcastle Mig. Company's capital investment review committee received two major investment proposals. One of the proposals was put forth by the firm's domestic manufacturing division, and the other came from the firm's distribution company Both proposals promise internal rates of return equal to approximately 15 percent. In the past, Newcastle has used a single firm wide cost of capital to evaluate new investments However, managers have long recognized that the manufacturing division is significantly more risky than the distribution division. In fact, comparable firms in the manufacturing division have equity betas of about 18, whereas distribution companies typically have equity botas of only 12. Given the size of the two proposals, Newcastle's management feels it can undertake only one, so it wants to be sure that it is taking on the more promising investment. Given the importance of getting the cost of capital estimate as close to correct as possible, the firm's chief financial officer has asked you to prepare cost of capital estimates for each of the two divisions. The requisite information needed to accomplish your task follows The cost of debt financing is 8 percent before taxes of 36 percent You may assume this cost of debt is after any flotation costs the firm might incut The risk free rate of interest on long-term U.S. Treasury bonds is currently 6.5 percent, and the market risk premium nas averaged 48 percent over the past several years Both divisions adhere to target debt ratios of 70 percent. The firm has sufficient intomally generated funds such that no new stock will have to be sold to sequity financing RUL possible Suomi qui Divisional costs of capital and investment decisions) in May of this year Newcastle Mlg Company's capital investment review comme received two major investment proposals. One of the proposals was put by the firm's domestic manufacturing division and the other come from the firm's distribution company. Both propos promise internal of retum equal to pril 15 percent in the past, Newcastle has used a single firm wide cost of capital to evaluate new investments However, managers have long recognized that the manufacturing division is significare more risky than the distribution division In fact, comparable forms in the manufacturing division have gaty botas of bout 18, whereas distribution companies typically have equity betas of only 12. Given the store of the two proposals Newcastle's management fool can undertake only on, not wants to be sure that it is taking on the more promising investment. Given the importance of getting the cost of capital estimate as close to correct as possible, the firm's chief financial cher has ked you to prepare con el capitalesmates for each of the two divisions. The requisito information needed to accomplish your task follow The cost of det financing in percent before taxes of 36 percent. You may assume cost of debt is horny flotation costs the firm mightingut The tree is of reston fong-US.Try bonds is currently 6.5 percent, and the market-risk premium has averaged 48 percent over the past several years Bon divains where to target attratos of To percent The festivaly genetiled funds such that a new stock will have to be sold to raise equity financing What even tout of capital for the manufacturing Submit quia Previous Next MacBook Air Iwonal costs of contrat de tren declara) in May of this year Newcate Mg Cotonny's capitis vivestment review committee meoved two major investment proposals. One of Cui What is the viene con el aporte meg? Els Round to two decine What is veral cost of capital for the fini? Round to wodom places Which of the rool mundiatake ng cannot do bom de to order non financial restraints? (Select the best choice below) OA Ming project because the cost of capitalisierend us the project reserva PV) is higher (Divisional costs of capital and investment decisions) in May of this year Newcastle Mig. Company's capital investment review committee received two major investment proposals. One of the proposals was put forth by the firm's domestic manufacturing division, and the other came from the firm's distribution company Both proposals promise internal rates of return equal to approximately 15 percent. In the past, Newcastle has used a single firm wide cost of capital to evaluate new investments However, managers have long recognized that the manufacturing division is significantly more risky than the distribution division. In fact, comparable firms in the manufacturing division have equity betas of about 18, whereas distribution companies typically have equity botas of only 12. Given the size of the two proposals, Newcastle's management feels it can undertake only one, so it wants to be sure that it is taking on the more promising investment. Given the importance of getting the cost of capital estimate as close to correct as possible, the firm's chief financial officer has asked you to prepare cost of capital estimates for each of the two divisions. The requisite information needed to accomplish your task follows The cost of debt financing is 8 percent before taxes of 36 percent You may assume this cost of debt is after any flotation costs the firm might incut The risk free rate of interest on long-term U.S. Treasury bonds is currently 6.5 percent, and the market risk premium nas averaged 48 percent over the past several years Both divisions adhere to target debt ratios of 70 percent. The firm has sufficient intomally generated funds such that no new stock will have to be sold to sequity financing RUL possible Suomi qui Divisional costs of capital and investment decisions) in May of this year Newcastle Mlg Company's capital investment review comme received two major investment proposals. One of the proposals was put by the firm's domestic manufacturing division and the other come from the firm's distribution company. Both propos promise internal of retum equal to pril 15 percent in the past, Newcastle has used a single firm wide cost of capital to evaluate new investments However, managers have long recognized that the manufacturing division is significare more risky than the distribution division In fact, comparable forms in the manufacturing division have gaty botas of bout 18, whereas distribution companies typically have equity betas of only 12. Given the store of the two proposals Newcastle's management fool can undertake only on, not wants to be sure that it is taking on the more promising investment. Given the importance of getting the cost of capital estimate as close to correct as possible, the firm's chief financial cher has ked you to prepare con el capitalesmates for each of the two divisions. The requisito information needed to accomplish your task follow The cost of det financing in percent before taxes of 36 percent. You may assume cost of debt is horny flotation costs the firm mightingut The tree is of reston fong-US.Try bonds is currently 6.5 percent, and the market-risk premium has averaged 48 percent over the past several years Bon divains where to target attratos of To percent The festivaly genetiled funds such that a new stock will have to be sold to raise equity financing What even tout of capital for the manufacturing Submit quia Previous Next MacBook Air Iwonal costs of contrat de tren declara) in May of this year Newcate Mg Cotonny's capitis vivestment review committee meoved two major investment proposals. One of Cui What is the viene con el aporte meg? Els Round to two decine What is veral cost of capital for the fini? Round to wodom places Which of the rool mundiatake ng cannot do bom de to order non financial restraints? (Select the best choice below) OA Ming project because the cost of capitalisierend us the project reserva PV) is higher