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need it simple not complicated The company called Technical Trading LLC is located in the heart of Al Ain and has been listed on the
need it simple not complicated
The company called Technical Trading LLC is located in the heart of Al Ain and has been listed on the Abu Dhabi Stock Exchange (ADX) since 18 September 2013. The business operates in the Capital Goods sector and is involved in the production of concrete to be used in the construction of buildings in the GCC region. The company is financed with long-term debt and common equity only. The company has 600,000 common shares outstanding, and the current share price of the firm's common stock is $14. Technical Trading LLC will pay a $2.50 dividend per share one year from now, which is expected to grow by 4% per year thereafter. Technical Trading LLC has 3,000 of 5-year bonds outstanding. The market interest rate for bonds of a similar risk profile is 9%. Coupon payments are annual at 8%. In addition, this year the management of Technical Trading LLC has been considering investing into a new 10-year expansion project called "Concrete 2030". o They have estimated that investing in this project will generate $800,000 in annual cash sales and incur cash costs of $250,000 per year. o This project requires an initial $2.9 million investment in fixed assets, which the management believes will be worthless at the end of their useful life. In addition, the project needs $200,000 in additional inventory and will cause increase in accounts payable of $100,000. Both these amounts are expected to be recovered at the end of the project's life. The firm is subject to a 30% corporate tax rate. In answering the questions that follow, show all the formulas used, workings, intermediate calculations, along with the final answer. a. Using the concepts of Cash Flow from Assets (CFA), Weighted Average Cost of Capital (WACC), and Net Present Value (NPV) b. Advise the management of Technical Trading LLC on whether they should accept the "Concrete 2030" project Step by Step Solution
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