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I need Questions H-L answered. Thanks! Federated Manufacturing is considering a major capital expenditure to begin production of a major new product. Key facts and
I need Questions H-L answered. Thanks!
Federated Manufacturing is considering a major capital expenditure to begin production of a major new product. Key facts and assumptions about this new product appear below. Using this information, answer the questions following. Facts and Assumptions Yield to maturity on long-term govemment bonds Yield to maturity on company long-term bonds Market price ofrisk Estimated company and project asset beta Stock price per share Number of shares outstanding Market value of interest-bearing debt outstanding Tax rate Inflation rate Initial cost of investment Year l selling price per uni Year 1 variable manufacturing cost per unit Year 1 general selling & administrative expenses Expected project life Salvage value Depreciation schedule Working capital Year Unit sales in mi a. Estimate Federated's equity beta Debt 80,000,000 Equity 120,000,000 Equity Beta 1.00 b. Estimate Federate's cost of equity capital Cost of equity capital 11.92% c. Estimate Federated's weighted-average cost of capital WACC 8.97% Straight-line 5.0% 7.0% 6.9% 0.70 2 million 80 million 35.0 3.0% 200 million 55 200 million 8 years 40 million 20.0% as percent of sales 23 24 23 22 Federated Manufacturing is considering a major capital expenditure to begin production of a major new product. Key facts and assumptions about this new product appear below. Using this information, answer the questions following. Facts and Assumptions Yield to maturity on long-term govemment bonds Yield to maturity on company long-term bonds Market price ofrisk Estimated company and project asset beta Stock price per share Number of shares outstanding Market value of interest-bearing debt outstanding Tax rate Inflation rate Initial cost of investment Year l selling price per uni Year 1 variable manufacturing cost per unit Year 1 general selling & administrative expenses Expected project life Salvage value Depreciation schedule Working capital Year Unit sales in mi a. Estimate Federated's equity beta Debt 80,000,000 Equity 120,000,000 Equity Beta 1.00 b. Estimate Federate's cost of equity capital Cost of equity capital 11.92% c. Estimate Federated's weighted-average cost of capital WACC 8.97% Straight-line 5.0% 7.0% 6.9% 0.70 2 million 80 million 35.0 3.0% 200 million 55 200 million 8 years 40 million 20.0% as percent of sales 23 24 23 22Step by Step Solution
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