please answer the question quiqly
Use the following information to answer the questions below; Sanad Inc. is considering replacing an existing piece of equipment with a more sophisticated machine. The following information is given. Facts Existing Machine Cost = $100,000 Purchased 2 years ago Depreciation using MACRS over a 5-year recover schedule Current market value = $ 105,000 Five year usable life remaining Proposed Machine Cost = $150,000 Installation = $20,000 Depreciationthe MA 5-year recovery sche Five year usable life e Earnings before Depreciation and Taxes Existing Machine Proposed Machine Year 1 $160,000 Year 1 $170,000 2 150,000 2 170,000 3 140,000 3 170,000 4 140,000 4 170,000 5 140,000 5 170,000 The firm has determined its optimal capital structure which is composed of The firm has determined its optimal capital structure, which is composed of the following sources and target market value proportions: Target Market Source of Capital Proportions Long-term debt. 30% Preferred Stock 15% Common Stock 55% Debt: The firm can sell a 20-year, $1,000 par value, 7 percent bond for $990. A flotation cost of 2 percent of the face value would be required in addition to the discount of $10. Preferred Stock: The firm has determined Preferred Stock: The firm has determined it can issue preferred stock at $65 per share par value. The stock will pay an $8.00 annual dividend. The flotation cost stock is $7 per share. Common Stock: The firm's common stock is currently selling for $50 per share. The dividend expected to be paid at the end of the coming year is $5.07. Its dividend payments have been growing at a constant rate for the last five years. Five years ago, the dividend was $3.45. a new common stock issue must be underpriced at $1 per share and the firm must pay $3 per share in flotation costs. The firm pays 20 percent taxes on ordinary income and capital gains. Sanad invests $7,000 in NWC that will be recovered at the final year of the project. recovered at the final year of the project. Calculate the book value of the existing asset being replaced. Calculate the tax effect from the sale of the existing asset. Calculate the initial investment required for the new asset. Calculate the incremental earnings before danradiation and avoc in vo1 $30,000 Calculate the incremental depreciation in years 3 and 5. $20,300 & $20,400 Calculate the incremental after-tax cash flow for years t = 2 through t = 4. $ 151,460 Calculate the terminal cash flow, if you know that the existing machine was fully depreciated and sold at $40,000, while the proposed machine sold at $190,000 after 4 years from the date of purchase. Calculate the firm's weighted average cost of capital assuming the firm has exhausted all retained earnings. 5.67% Calculate the cost of debt 12.9% Calculate the cost of preferred stock $16,167.2 Calculate the cost of common stock
