Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please attempt the question if you can solve all the questions, please do not attempt if you are going to solve only 1 part. Calculate

Please attempt the question if you can solve all the questions, please do not attempt if you are going to solve only 1 part.

image text in transcribed

image text in transcribed

Calculate the WACC of the following:

Debt = 40% Preferred stock = 10% Common stock = 50% Cost of debt = 10% Cost of common stock = 12% Cost of preferred stock = 7% Tax rate = 25%

The Wildcat Oil Company is trying to decide whether to lease or buy a new computerassisted drilling system for its oil exploration business. Management has decided that it must use the system to stay competitive; it will provide $3.9 million in annual pretax cost savings. The system costs $9.8 million and will be depreciated straight-line to zero over five years. Wildcat's tax rate is 25 percent, and the firm can borrow at 7 percent. Lambert Leasing Company is willing to lease the equipment to Wildcat. Lambert's policy is to require its lessees to make payments at the start of the year. Suppose it is estimated that the equipment will have an aftertax residual value of $1,125,000 at the end of the lease. What is the maximum lease payment acceptable to Wildcat? (Do not round intermediate calculations and enter yuor answer in dollars, not millions, rounded to 2 decimal places, e.g., 1,234,567.89.) Strickler Technology is considering changes in its working capital policies to improve its cash flow cycle. Strickler's sales last year were $3,530,000 (all on credit), and its net profit margin was 7%. Its inventory turnover was 6.5 times during the year, and its DSO was 38 days. Its annual cost of goods sold was $1,950,000. The firm had fixed assets totaling $565,000. Strickler's payables deferral period is 41 days. Assume a 365 day year. Do not round intermediate calculations. Calculate Strickler's cash conversion cycle. Do not round intermediate calculations. Round your answer to two decimal places. Assuming Strickler holds negligible amounts of cash and marketable securities, calculate its total assets turnover and ROA. Do not round intermediate calculations. Round your answers to two decimal places. Suppose Strickler's managers believe the annual inventory turnover can be raised to 10 times without affecting sale or profit margins. What would Strickler's cash conversion cycle, total assets turnover, and ROA have been if the inventory turnover had been 10 for the year? Do not round intermediate calculations. Round your answers to two decimal places

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Countering Terrorist Finance A Training Handbook For Financial Services

Authors: Tim Parkman, Gill Peeling

1st Edition

0566087251, 978-0566087257

More Books

Students also viewed these Finance questions