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Plz I need a correct answer Given the net cash flows for Project X (over 3-years) for Aberdeen Company Year CF 0-$300,000 1 $120,000 2
Plz I need a correct answer
Given the net cash flows for Project X (over 3-years) for Aberdeen Company Year CF 0-$300,000 1 $120,000 2 $128,000 3 $155,000 The company's capital structure is distributed equally between debt, preferred stock, common stock and new common stock. It has also the following information: 1- After tax cost of debt 5.4%. Tax rate: 40% 2- Preferred stocks are selling at $80 per share and pay a dividend of $8 per share 3- Common stocks are selling at $50 per share, pay a year-end dividend of $3 per share and grow at a constant rate of 6%. When issuing new common stock, a 10% flotation cost would be incurred. The company is also considering another two projects Y* & *Z' with the following information Projects Y Z NPV $20,100.3 $37,320.2 MIRR 9.2% 14.5% IRR 7.77% 15.04% Payback period in years 4.1 1.64 NPV for project "X" is $31,329.82. MIRR for project "X" is 13.70% The discounted pay-back period for project "X" is 2.73 years. The pay-back period for project "X" is 2.33 years. 7. Assuming that the three projects X,Y & Z are independent, based on MIRR criteria which project(s) should the company accept? A. Project X B. Project C. Projects X Y & Z D. Only Projects X & Z E Reject all projectsStep by Step Solution
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