Answered step by step
Verified Expert Solution
Question
1 Approved Answer
i NEED help with this question!!! MAKE SURE YOU COMPLETE ALL QUESTIONS WITHIN THIS PROBLEM. THERE ARE 14 DROPDOWN BOXES TO COMPLETE, You will recelve
i NEED help with this question!!!
MAKE SURE YOU COMPLETE ALL QUESTIONS WITHIN THIS PROBLEM. THERE ARE 14 DROPDOWN BOXES TO COMPLETE, You will recelve partial credit for all correct answers. The Phillips Company is considering increasing its headphone production capacity to fulfill a large private contract. The CFO has tasked her finance staff to analyze the project and make a recommendation to the executive team to be included at next month's board meeting. The CFO provides the following information to the analyst: COST OF CAPITAL Phillips' current capital structure is comprised of $300,000,000 in debt, $150,000,000 in preferred equity, and $450.000.000 in common equity. Phillips currenthy has issued bonds that mature in 10 years with a coupon rate of 7.5% and a current market price of $865. Preferred shares of Phillips are trading at \$67/share and pay an annual dividend of \$1.75/share. Common stock of Phillips has a beta of 1.1 and trades at $46/ share. The 10 -year US treasury yield is 4.25%. The market risk premium is estimated at 7.75%. Their tax rate is 35%. Round answers to four decimal places (ie. 1125 or 11.25% ) - What is the current cost of Phillips debt capital? - What is the current cost of Phillips preferred equity capital? - What is the current cost of Phillips common equity capital (using CAPM)? Use your answers above and the information below to complete the remaining questions. PROJECT CASHFLOWS Philips expects to invest $18,500,000 in new/plant equipment. The contract will last for 10 years, at which point it expects its plant equipment to have a salvage value of $7,000,000. They plan to finance this project using 65% debt and 35% equity. Their investment banker advises there are transaction costs of 2.0% on debt and 11.0% on equity. Phillips expects to increase its accounts receivable by $1,500,000, its inventory by $4,000,000, and its accounts payable by $2,500,000. It expects to sell 45,000 units at a price of $275/ unit, with variable cost per unit of $165. It expects additional operating costs each year of $900,000. Phillips tax rate is 35%. - What is the annual depreciation for the fixed assets of thishroject? - What is the firm's weighted average flotation cost? (round to four decimal ploces) - What is the firm's flotation adjusted Initial Capital Expenditure? (round to nearest $100,000 ) - What is the projected Cash flow at Year 0? (round to nearest $100,000 ) b - What is expected Cash flow Year 1-9? (round to nearest $100,000 ) What is the projected Cash flow at Year 0? (round to nearest \$100,000) Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started