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Question 6-9 please The Rock Bottom Pub Company Limited are considering opening a new 'super- pub in Thornaby. the cost of the project will be
Question 6-9 please The Rock Bottom Pub Company Limited are considering opening a new 'super- pub in Thornaby. the cost of the project will be 700,000 and it is expected to generate net cash flows of 120,000 per year in perpetuity. the company has a target debt/equity ratio of 1, a flotation cost of debt of 6%, a flotation cost of equity of 12%, a yield-to-maturity of 9% and a required return on equity of 15%. the rate of corporate taxation is 30%. Should the firm proceed with the project? 7. Under what Circumstances is the WACC an appropriate measure of the, rate for a project? Are these circumstances likely to hold in practice? 8. Ordinary shares of Jack Rabbit Slim Ltd. are currently quoted at 3 each. JRS announce a rights issue where each existing shareholder is given the right to purchase one share at 1.75 for each five shares held. Mr Wallace currently holds 10,000 shares in JRS
Question 6-9 please
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