Question
JUST NEED HELP WITH D-1 c IS SHOWN FOR REFERENCE. DataPoint Engineering is considering the purchase of a new piece of equipment for $260,000. It
JUST NEED HELP WITH D-1 c IS SHOWN FOR REFERENCE.
DataPoint Engineering is considering the purchase of a new piece of equipment for $260,000. It has an eight-year midpoint of its asset depreciation range (ADR). It will require an additional initial investment of $160,000 in nondepreciable working capital. Forty thousand dollars of this investment will be recovered after the sixth year and will provide additional cash flow for that year. Income before depreciation and taxes for the next six are shown in the following table. Use Table 1211, Table 1212. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.
Year | Amount | ||||
1 | $ | 191,000 | |||
2 | 164,000 | ||||
3 | 134,000 | ||||
4 | 119,000 | ||||
5 | 97,000 | ||||
6 | 87,000 | ||||
The tax rate is 25 percent. The cost of capital must be computed based on the following:
Cost (aftertax) | Weights | ||||||||
Debt | Kd | 5.80 | % | 30 | % | ||||
Preferred stock | Kp | 11.60 | 10 | ||||||
Common equity (retained earnings) | Ke | 16.00 | 60 | ||||||
d1- Determine the net present Value( Ust the WACC from part crounded to 2 decimal places as a percent as the cost of capital . Do not round any other intermediat calculation. Round your answer to 2 decimal places
C. Determine the weighted averae cost of capital = 12.50% to use for D1
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