Question
Short Answer Instructions: Show work clearly for partial credit. Don't round anything until the final answer. If the answer to a previous part of the
Short Answer Instructions: Show work clearly for partial credit. Don't round anything until the final answer. If the answer to a previous part of the question is needed to solve subsequent parts of the question, use the unrounded result instead of the rounded answer. Round all answers expressed in dollars to the nearest penny unless otherwise instructed. Express all percentage answers in percentage form, and round to two decimal places (Example: 6.42%)
Use the following information to answer the next five questions: Consider the after-tax cash flows below from a project that is being considered by Despondus Corporation. Since the project is an extension of the firm's current business, it carries the same risk as the overall firm.
Year | 0 | 1 | 2 | 3 | 4 | 5 |
Cash Flow | -$430,000 | $90,000 | $66,000 | $104,000 | $90,000 | $102,000 |
Despondus Corporation's common stock is currently priced at $74.19, and there are 610,000,000 shares outstanding. A dividend of $3.6 per share was just paid, and dividends are expected to grow at a constant rate of 5.56% per year.
The company has 13,580,000 bonds outstanding that mature in 27 years and are currently priced at $1,016 per bond. The coupon rate is 5.64%, and the bonds make semiannual interest payments. The company's tax rate is 29%.
What is Despondus Corporation's after-tax cost of equity?
What is Despondus Corporation's after-tax cost of debt?
What is Despondus Corporation's weighted average cost of capital (WACC)?
What is the net present value of the project? (Round to the nearest dollar.)
Should the project be accepted? Explain your answer; a simple 'yes' or 'no' will result in no points for this part of the question
plz answers under it's question
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