No-No Bad Dog (NNBD) Training School wants to maintain its current capital structure of 50 percent common equity, 10 percent preferred stock, and 40 percent debt. Its cost of common equity is 13 percent, and the cost of preferred stock is 12 percent. The cost of issuing new common stock is 13.8 percent. The bank charges an annual rate of interest of 11 percent for amounts borrowed that are less than or equal to dollar 1 million, and 13 percent for amounts between dollar 1 million and dollar 2 million. If more than dollar 2 million is borrowed, they charge a 15 percent annual rate of interest. No-No's tax rate is 40 percent. The firm expects to net dollar 2, 750,000 in income after paying preferred dividends this year. How many total break points does this No-No Bad Dog have both debt and equity)? 1 2 3 4. How much total capital can NNBD raise before reaching their equity break point? dollar 2,000,000 dollar 2, 750,000 dollar 5,000,000 dollar 5, 500,000 What is NNBD's WACC if they finance with retained earnings and borrow dollar 900,000? 6.6 percent 10.34 percent 11 percent 12.1 percent Suppose NNBD s owner leaves a pizza box on the stove in the break room. While they are busy taking a phone call, their bloodhound steals the pizza and starts the building on fire. The firm will need to borrow funds to rebuild their facility. This is likely to affect which of the following? Maturity Coupon rate Discount rate Dividends What is NNBD's MCC if dollar 3,000,000 is needed for an upcoming expansion? 10.34 percent 10.82 percent 11.30 percent 13 percent NNBD has the opportunity to purchase a competitor's business that will make them the only training school within a 50-mile radius. The competitor has agreed to sell the business for dollar 5,005,000. What is the MCC for this project? 10.34 percent 10.82 percent 11.30 percent 13.9 percent No-No Bad Dog (NNBD) Training School wants to maintain its current capital structure of 50 percent common equity, 10 percent preferred stock, and 40 percent debt. Its cost of common equity is 13 percent, and the cost of preferred stock is 12 percent. The cost of issuing new common stock is 13.8 percent. The bank charges an annual rate of interest of 11 percent for amounts borrowed that are less than or equal to dollar 1 million, and 13 percent for amounts between dollar 1 million and dollar 2 million. If more than dollar 2 million is borrowed, they charge a 15 percent annual rate of interest. No-No's tax rate is 40 percent. The firm expects to net dollar 2, 750,000 in income after paying preferred dividends this year. How many total break points does this No-No Bad Dog have both debt and equity)? 1 2 3 4. How much total capital can NNBD raise before reaching their equity break point? dollar 2,000,000 dollar 2, 750,000 dollar 5,000,000 dollar 5, 500,000 What is NNBD's WACC if they finance with retained earnings and borrow dollar 900,000? 6.6 percent 10.34 percent 11 percent 12.1 percent Suppose NNBD s owner leaves a pizza box on the stove in the break room. While they are busy taking a phone call, their bloodhound steals the pizza and starts the building on fire. The firm will need to borrow funds to rebuild their facility. This is likely to affect which of the following? Maturity Coupon rate Discount rate Dividends What is NNBD's MCC if dollar 3,000,000 is needed for an upcoming expansion? 10.34 percent 10.82 percent 11.30 percent 13 percent NNBD has the opportunity to purchase a competitor's business that will make them the only training school within a 50-mile radius. The competitor has agreed to sell the business for dollar 5,005,000. What is the MCC for this project? 10.34 percent 10.82 percent 11.30 percent 13.9 percent
