Brookings Bros, Inc. is considering its investment plan for next year. Before the meeting of top management, CEO of the company asks for the current overall cost of the company. CFO of the company will then prepare the data and answer this question of what is the cost of the firm doing business (WACC).

The company currently has bonds with market value of $361,812 and the pre-tax cost of bonds is 11.67%. The company has preferred stocks with a market value of $100,000. The cost of the preferred stocks is 10%. The company has 10,000 outstanding shares of common stocks that are selling at $70 per share and just paid a dividend of $3.96 last year. Analysts believe the company will keep its 6% constant growth rate of its dividend in the future. Assuming the company has 40% tax rate.

Questions are:

1. Based on the information given, what is the WACC of the company? The follow table helps summarizing and sorting out information needed to find WACC of the company. Fill it in wherever it is applicable (Copy the table from the question and paste it into your answer, then fill in the blanks properly. Show need calculation separately below the table).
2. If an investment project generates a return of 12% and has a risk level same as the average risk of the company, would you accept this project? Why or why not?

Question 1 10 pts Brookings Bros, Inc. is considering its investment plan for next year. Before the meeting of top management, CEO of the company asks for the current overall cost of the company. CFO of the company will then prepare the data and answer this question of what is the cost of the firm doing business (WACC). The company currently has bonds with market value of $361,812 and the pre-tax cost of bonds is 11.67%. The company has preferred stocks with a market value of $100,000. The cost of the preferred stocks is 10%. The company has 10,000 outstanding shares of common stocks that are selling at $70 per share and just paid a dividend of $3.96 last year. Analysts believe the company will keep its 6% constant growth rate of its dividend in the future. Assuming the company has 40% tax rate. Questions are: 1. Based on the information given, what is the WACC of the company? The follow table helps summarizing and sorting out information needed to find WACC of the company. Fill it in wherever it is applicable (Copy the table from the question and paste it into your answer, then fill in the blanks properly. Show need calculation separately below the table). 2. If an investment project generates a return of 12% and has a risk level same as the average risk of the company, would you accept this project? Why or why not? Source Market Value Weight Before -tax Cost After-tax Cost Debt Preferred Common Total HTML Editor