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Calculation questions Must show steps in all calculations. Final answer only will result in zero point. Question 1 6 ( 1 7 points ) Nova
Calculation questions
Must show steps in all calculations. Final answer only will result in zero point.
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Nova Corp. has million shares of common stock outstanding. It just paid an annual dividend of D $ per share. ABC Industries always retains of its earnings, which it uses for investment projects that earn a ROE.
Investors expect the share price next year to be P $ In addition, the company also has shares of preferred stock. and they pay an annual dividend of $ with required rate of return. The company has bonds with an coupon rate. They mature in years. Interest is paid semiannually. The yield to maturity on other bonds of similar risk is The corporate income tax rate is points
a What is the WACC of Nova Corp.?
b Nova Corp. is considering investing $ million in a project that has a similar risk level to the company. The project will be financed through the same capital structure as the company. The project is expected to generate annual operating cash flow of $ for years without salvage value. If the floatation costs for bonds, preferred shares and common shares are and respectively, should you accept the project after considering issuing floatationcosts
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