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Mwechtml uply. Capital Structure and Project Assessment Decision ... O Saved Part 1 Peter Johnson, the CFO of Homer Industries, Inc is trying to determine
Mwechtml uply. Capital Structure and Project Assessment Decision ... O Saved Part 1 Peter Johnson, the CFO of Homer Industries, Inc is trying to determine the Weighted Cost of Capital (WACC) based on two different capital structures under consideration to fund a new project. Assume the company's tax rate is 30%, Tax Rate 30 Component Debt Preferred Stock Common Stock Total Scenario 1 $5,000,000.00 1.200,000.00 1.800,000.00 $8,000,000.00 Scenario 2 $2,000,000.00 2,200,000.00 3,800,000.00 $8,000,000.00 Cost of Capital 8% 10% 13% 1-0. Complete the table below to determine the WACC for each of the two capital structure scenarios. (Enter your answer as a whole percentage rounded to 2 decimal places (e.g..3555 should be entered as 35.55).) Scenario 1 Weight % Scenario 2 Weight % Scenano Scenano 2 Weighted Cost Weighted Cost Cost of Capital Tax Rate 30% Debt Preferred Stock Common Stock 8% 10% 13% Total 1-b. Which capital structure shall Mr. Johnson choose to fund the new project? Scenario 1 Scenario 2 Part 2 Assume the new project's operating cash flows for the upcoming 5 years are as follows: Proiect A
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