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Please answer them all and thank you. Use the following data to answer Questions 1 through 14: Mercury Inc. is considering an expansion project that
Please answer them all and thank you.
Use the following data to answer Questions 1 through 14: Mercury Inc. is considering an expansion project that has a life of four years. The proposed project has the following features: Initial cost of the equipment is $200,000, with shipping cost of $10,000 and modification cost of $30,000. The company will also pay $25,000 to find a suitable place to install the equipment. The equipment will be depreciated over 4 years using MACRS at the following rates (33%, 45%, 15%, and 7%) Inventories will increase by $25,000, and accounts payable will rise by $5,000. The company will sell 100,000 units per year with a price of $2/unit. The company's total operating cost will equal to $120,000 each year. At t=4, the equipment's salvage value is $25,000. The company's tax rate is 40%. The project's WACC is 10% 12. The Book Value of the equipment at termination is: O A. $20,000 B. SO C. $40,000 D. $240,000 O E None of the above 13. The Terminal Value (TV) is: * O A $40,000 B. $30,000 C. $35,000 O D. $25,000 O E. None of the above 14. The NPV value of the project is: A -$4,029.72 B. $23,679 C. $27,953.24 D. $30,420 E. None of the above Problem Two Use the following data to answer Question 15: Fox Co. is considering two mutually exclusive projects. Both projects require an initial investment of $10,000 at t = 0. Project X has an expected life of 2 years with after-tax cash inflows of $6,000 and $8,500 at the end of Years 1 and 2, respectively. Project Y has an expected life of 4 years with after-tax cash inflows of $4,600 at the end of each of the next 4 years. Each project has a WACC of 11% 15. Which project should the company choose? * 10 points A. Project Y B. Project X C. Both Projects D. None of the above Problem Three Use the following data to answer Question 16: Jack Bauer, CFA, is estimating the WACC for Clarks Corporation. He prepares the following data for Clarks: Price per share = $50. Expected dividend per share = $3. Expected retention ratio (RR) = 30%. Expected return on equity = 20%. Beta = 0.89. The company has an outstanding debt consisting of 20-year par value bonds with a semiannual coupon rate of 5% The expected market rate of return is 12% and the risk-free rate is 3%. The dividend is expected to grow at some constant rate g The firm's target capital structure consists of 40% debt and 60% equity. The firm's marginal tax rate is 40%. 16. The company's weighted average cost of capital is closest to: * 10 points O A. 9.6% B. 7.8% C. 9.0% D. 10.6% O E. None of the aboveStep by Step Solution
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