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if you may help me with the questoin , all the points are related to the problem Gean's Inc. recently hired you as a consultant
if you may help me with the questoin , all the points are related to the problem
Gean's Inc. recently hired you as a consultant to estimate the company's WACC. You have obtained the following information. The firm has $400,000 of debt outstanding, $200,000 of preferred stock, $300,000 of retained earnings and $300,000 of new common stock. The firm's bonds mature in 20 years and have a 10% yield to maturity. The company's tax rate is 40%. The firm's preferred stock currently sells for $80 a share and pays an annual dividend of $11. The firm is expected to pay a $2.50 dividend at year end (D1 = $2.50), the dividend is expected to grow at a constant rate of 5.50% a year, and the common stock currently sells for $52.50 a share. The issuance of new common stock would incur the firm 6% flotation cost. The firm has three proposed projects with the same level of risk as of the firm. Project A's IRR is 12%, project B's IRR is 9.8% and project C's IRR is 7.7%. 5. The weight of debt is: * $400,000 33.33% 16.67% 25% None of the above 6. The weight of preferred stock is: * $200,000 33.33% 16.67% 25% O None of the above 7. The weight of common stock from retained earnings is: * $300,000 33.33% O 16.67% 25% None of the above 8. The weight of external equity is: $600,000 0 0% 16.67% 25% O None of the above 9. The approximate Weighted Average Cost of Capital (WACC) is: * 19.50% 10.29% 9.50% 7.50% None of the above 10. Which of the two proposed project(s) would be accepted? * Project A Project B Project C All of the projects None of the above Step by Step Solution
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