Call toll free: +1 (304) 900-6229 or Request a call

support@essayhelp123

This assignment will allow you to demonstrate the following objectives: Compute the net present value, profitability index, and internal rate of return

This assignment will allow you to demonstrate the following objectives:

  • Compute the net present value, profitability index, and internal rate of return for a given company.
  • Predict the best choice for a company based on analysis of financial data.
  • Compute a company’s WACC using given percentages.
  • Calculate the cost of capital of a stock.
  • Computer the after-tax cost of capital for bonds.

Instructions: Answer the questions directly on this document. When you are finished, select “Save As,” and save the document using this format: Student ID_UnitVIII. Upload this document to BlackBoard as a .doc, docx, or .rtf file. Show all of your work.

1. The Turnip Company plans to issue preferred stock. Currently, the company’s stock sells for $110. Once new stock is issued, the Turnip Company would receive only $90. The dividend rate is 8%, and the par value of the stock is $100. Compute the cost of capital of the stock to your firm. Show all work.

2. The Maximus Corporation is considering a new investment, which would be financed from debt. Maximus could sell new $1,000 par value bonds at a new price of $920. The bonds would mature in 13 years, and the coupon interest rate is 10%. Compute the after-tax cost of capital to Maximus for bonds, assuming a 34% tax rate. Show work.

3. Connor Corporation is considering two projects (see below). For your analysis, assume these projects are mutually exclusive with a required rate of return of 10%.

Project 1Project 2Initial investment$(465,000)$(700,000)Cash inflow Year 1$510,000$850,000

Compute the following for each project:

  • NPV (net present value)
  • PI (profitability index)
  • IRR (internal rate of return)

Based on your analysis, answer the following questions :

  • Which is the best choice? Why?
  • Which project should be selected and why? If the projects had the same IRR amounts but different NPV totals, then how would you know which project to select? Explain.
  • What would happen if both projects had negative NPV totals? Which project would you choose? What do negative NPVs indicate? Explain.
  • Should we also use the payback method to assist us in project selection? Why or why not? Explain.

4. The capital structure for Magellan Corporation is shown below. Currently, flotation costs are 13% of market value for a new bond issue and $3 per share for preferred stock. The dividends for common stock were $2.50 last year and have an estimated annual growth rate of 6%. Market prices are $1,020 for bonds, $20 for preferred stock, and $30 for common stock. Assume a 34% tax rate.

Financing Type

% of Future

Financing

Bonds (8%, $1k par, 16 year maturity)36%Common equity45%Preferred stock (5k shares outstanding, $50 par, $1.50 dividend)19%Total %100%

Compute the company’s WACC. Is this WACC considered reasonable given the assumptions and other relevant information? Explain.

Share This Post

Email
WhatsApp
Facebook
Twitter
LinkedIn
Pinterest
Reddit

Order a Similar Paper and get 15% Discount on your First Order

Related Questions

Overview For the final project in the course, you will analyze the case study Value-Driven Project and Portfolio Management in the Pharmaceutical

Overview For the final project in the course, you will analyze the case study Value-Driven Project and Portfolio Management in the Pharmaceutical Industry and additional course resources to create a program performance report for a hypothetical organization. The completion of this project will allow you to demonstrate your knowledge of program-level management

In an effort to evaluate the cyber security threats in the public and private sector, research/locate two recent cyber-attacks and discuss their

In an effort to evaluate the cyber security threats in the public and private sector, research/locate two recent cyber-attacks and discuss their impact. Identify factors that made this system vulnerable. What response was taken to protect this critical infrastructure after the fact? What lesson for homeland security would you draw from your examples? 

Utilizing the attached file, conduct an article review of the scholarly journal article.  Additionally, the review of the journal article is an evaluation

Utilizing the attached file, conduct an article review of the scholarly journal article.  Additionally, the review of the journal article is an evaluation of the article’s strengths, weaknesses, and validity. You will use this to decide the article’s value through your explanation, interpretation, and analysis. Use the required elements below as headings

Effectively communicating with the media and public is an important tool during a disaster. Using the readings/research on the following pandemics: 1918

Effectively communicating with the media and public is an important tool during a disaster. Using the readings/research on the following pandemics: 1918 Spanish Flu, 2009 H1N1 Pandemic, and the Covid-19 pandemic describe the successes and shortcomings of the public information messages communicated. Compare and contrast the public messaging between these