Question 6 10 pts Consider the same project described in the previous problem, where the equipment will cost $18.000.000, it will depreciated by the straight-line method over six years, and the useful life of the project is also estimated to be six years. You expect annual sales to be $12.750.000. Fixed Costs are estimated at $1,750,000 and variable costs should be 55% of sales. Your firm faces a 30% marginal tax rate. You also expect that at the end of the six-year operating life, you will be able to sell the equipment for scrap for $5.000.000. Consider any capital gains taxes on this sell After the initial analysis, the members of the team realized that the firm will also need to carry $3,200,000 in net working capital through the life of the project to support the operation Given this additional consideration, re-estimate the Net Present Value of the investment given the firm's requirement of a return of 9% on such projects. 0 $646,362 O $592.993 $1.937527 5645,583 Question 7 10 pts You have been assigned to calculate the weighted Average cost of Capital for your firm, which has two sources of long-term capital. The company's marginal tax rate is 25%. First, there are 207.500 shares of common stock, which are currently selling for $41.93. Recently, the firm announced EPS of $3.87. You feel that it is reasonable to assume that earnings will grow at 1.35% into the future. Second, there is an issue of 4.500 coupon bonds with a face value of $1,000, which pays 5,10% (annual) coupons, and mature in eleven years. These bonds are currently trading for $948.07 First, given the assumptions, estimate the implied return on the common shares 031.41% 10.70% 10.58% 9.36% You have been assigned to calculate the Weighted Average-Cost-of-Capital for your firm, which has two sources of long-term capital. Continue with the values and assumptions outlined above. The company's marginal tax rate is 25% First, there are 207.500 shares of common stock, which are currently selling for $41.93 Recently, the form announced EPS of $3.87. You feel that it is reasonable to assume that earnings will grow at 1.35% into the future. Second, there is an issue of 4.500 coupon bonds with a face value of $1.000, which pays 5.10% (annual) coupons, and mature in cleven years. These bonds are currently trading for $948.07 Second, calculate the yield-to-maturity on the company's bonds. 5.10% 5.7596 O 5.35% 4.75% You have been assigned to calculate the Weighted Average Cost-of-Capital for your firm, which has two sources of long-term capital Continue with the values and assumptions outlined above. The company's marginal tax rate is 25% First, there are 207.500 shares of common stock, which are currently selling for $41.93. Recently, the firm announced EPS of $3.87. You feel that it is reasonable to assume that earnings will grow at 1.35% into the future. Second, there is an issue of 4,500 coupon bonds with a face value of $1,000, which pays 5.10% (annual) coupons, and mature in eleven years. These bonds are currently trading for $948.07. Third, what is the weight of the firm's assets held by the stock holders You have been assigned to calculate the Weighted Average Cost-of-Capital for your firm, which has two sources of long-term capital Continue with the values and assumptions outlined above. The company's marginal tax rate is 25% First there are 207.500 shares of common stock, which are currently selling for $41.93. Recently, the firm announced EPS of $3.87. You feel that it is reasonable to assume that earnings will grow at 1.35% into the future. Second, there is an issue of 4,500 coupon bonds with a face value of $1,000, which pays 5.10% annual) coupons, and mature in eleven years. These bonds are currently trading for $948.07 Fourth, what is the firm's weighted-average-cost-of-capital? O 8.23% 08/6096 07.18% 6.80%
