Question
Please answer all the questions 1 A companys weighted average cost of capital is 9.9% per year. A project requires an investment of $1,200 today
Please answer all the questions
1
A companys weighted average cost of capital is 9.9% per year. A project requires an investment of $1,200 today and it is expected to generate after-tax cash flows of $400 per year for the next five years. What is the projects payback period?
2
The yield to maturity on a companys debt is 6.2% per year and the companys cost of equity financing is 10.9% per year. The book value of the debt is $30.0 million and the book value of the equity is $15.0 million. The companys tax rate is 32%. The market value of the debt is $36.9 million and the market value of the equity is $27.1 million. What is the companys annual weighted average cost of capital?
3
A project requires an investment of $125,000 today and it is expected to generate after-tax cash flows of $5,000 per month for the next three years. The companys weighted average cost of capital is 9.6% per year. What is the projects annual modified internal rate of return?
4
A companys weighted average cost of capital is 12.8% per year. Which of the following independent projects should it pursue?
Project IRR
1-12.2%
2-11.8%
3-13.1%
4-12.6%
5
A companys common stock has a market value of $52.83 per share and its last dividend was $3.94 per share. The stocks beta is 1.07, the tax rate is 31%, and the expected market return is 10.5% per year. The riskiness of the companys equity requires that it provide a risk premium of 3.5% per year over the yield on its long-term debt. If the risk-free interest rate is 4.6% per year, what is the companys annual cost of internal equity financing?
6
A companys weighted average cost of capital is 10.3% per year. Which of the following mutually exclusive projects should it not pursue? Project IRR NPV
1-10.7% $154
2-10.9% $122
3-10.2% -$77
4-10.5% $189
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