Saved16a. What are the project costs of capital for new ventures with betas of 0.70 and 1.59? (Do not round intermediate calcyour answers as a percent rounded to 2 decimal places.)BetaCost of Capital0.7%1.59%b. Which of the capital investments shown above have positive (non-zero) NPV's? (You may select more than one anthe box with the question mark to produce a check mark for a correct answer and double click the box with the qempty the box for a wrong answer.)2 Project P7 Project Q7 Project S7 Project T? Project R< Prev16 of 17Next The Treasury bill rate is 5% and the market risk premium is 8%.InternalRate ofProjectBetaReturn, %0.95140.0012R.2.00210.35131.6023a. What are the project costs of capital for new ventures with betas of 0.70 and 1.59? (Do not round intermediate calculations. Enyour answers as a percent rounded to 2 decimal places.)BetaCost of Capital0.71.59%b. Which of the capital investments shown above have positive (non-zero) NPV's? (You may select more than one answer. Singlthe box with the question mark to produce a check mark for a correct answer and double click the box with the question meempty the box for a wrong answer.)? Project P

Cost of Capital is the cost of the entire project that should be received for accepting the project.

a. What are the project costs of capital for new ventures with betas of 0.70 and 1.59? (Do not round intermediate calculations. your answers as a percent rounded to 2 decimal places.) Beta Cost of Capital 0.7 % 1.59 % b. Which of the capital investments shown above have positive (non-zero) NPV's? (You may select more than one answer. S the box with the question mark to produce a check mark for a correct answer and double click the box with the question

a. What are the project costs of capital for new ventures with betas of 0.70 and 1.59? (Do not round intermediate calculations. your answers as a percent rounded to 2 decimal places.) Beta Cost of Capital 0.7 % 1.59 % b. Which of the capital investments shown above have positive (non-zero) NPV's? (You may select more than one answer. S the box with the question mark to produce a check mark for a correct answer and double click the box with the question

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 7P

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The Treasury bill rate is 3% and the market risk premium is 8%. a. What are the project costs of capital for new ventures with betas of 0.60 and 1.15? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Beta Cost of Capital 0.6 % 1.15 % b. Which of the capital investments (Project P,Q,R,S,T) shown in image have positive (non-zero) NPV's? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.)
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Suppose Mullens Corporation is considering three average-risk projects with the following costs and rates of return: Project Cost Expected Rate of Return 1 $2,500 23.00% 2 $3,000 30.00% 3 $2,750 24.00% Mullens estimates that it can issue debt at a rate of rd=20.00%rd=20.00% and a tax rate of T=25.00%T=25.00%. It can issue preferred stock that pays a constant dividend of Dp=$20.00Dp=$20.00 per year and at Pp=$200.00Pp=$200.00 per share. Also, its common stock currently sells for P0=$16.00P0=$16.00 per share. The expected dividend payment of the common stock is D1=$4.00D1=$4.00 and the dividend is expected to grow at a constant annual rate of g=5.00%g=5.00% per year. Mullens’ target capital structure consists of ws=75.00%ws=75.00% common stock, wd=15.00%wd=15.00% debt, and wp=10.00%wp=10.00% preferred stock. 1.According to the video, the after-tax cost of debt can be stated as ________________ . Plugging in the values for rdrd and (T)T yields an after-tax cost of…
The common stock of Buildwell Conservation & Construction, Inc. (BCCI), has a beta of .8. The Treasury bill rate is 4% and the market risk premium is estimated at 7%. BCCI’s capital structure is 30% debt paying a 5% interest rate, and 70% equity. What is BCCI’s cost of equity capital and its WACC? Buildwell’s tax rate is 35%. Should BCCI accept a project with an IRR of 12%? Explain why.
Gigih Selalu Limited is deciding to invest in a new project. The project would have asimilar risk as its existing projects. The company needs to determine the appropriatediscount rate for evaluation purposes. The market risk premium is 8% and risk-free rate is4,5%. Assume company’s tax rate is 35%.The company has 8,000 6.5% coupon bonds outstanding, RM1,000 par value, 20 years tomaturity, selling at 92% of par. The bond makes semiannual payments.The company also has 250,000 common shares outstanding, selling at RM57 per share,with the beta of 1.05.In addition to common stock, Gigih Selalu Limited has 15,000 shares of 5% preferredstock outstanding, currently selling for RM93 per share.From the information above, calculate:i. The total market value of the firmii. The cost of equityiii. The cost of debtiv. Cost of preferred sharesv. WACC for the new project
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Adamson Corporation is considering four average-risk projects with the following costs and rates of return: Project Cost Expected Rate of Return 1 $2,000 16.00% 2 3,000 15.00    3 5,000 13.75    4 2,000 12.50    The company estimates that it can issue debt at a rate of rd = 11%, and its tax rate is 25%. It can issue preferred stock that pays a constant dividend of $4.00 per year at $50.00 per share. Also, its common stock currently sells for $43.00 per share; the next expected dividend, D1, is $4.25; and the dividend is expected to grow at a constant rate of 7% per year. The target capital structure consists of 75% common stock, 15% debt, and 10% preferred stock. What is the cost of each of the capital components? Do not round intermediate calculations. Round your answers to two decimal places. Cost of debt:   % Cost of preferred stock:   % Cost of retained earnings:   % What is Adamson's WACC? Do not round intermediate calculations. Round your answer to…
Adamson Corporation is considering four average-risk projects with the following costs and rates of return: Project Cost Expected Rate of Return 1 $2,000 16.00% 2 3,000 15.00 3 5,000 13.75    4 2,000 12.50    The company estimates that it can issue debt at a rate of rd = 10%, and its tax rate is 25%. It can issue preferred stock that pays a constant dividend of $4.00 per year at $48.00 per share. Also, its common stock currently sells for $33.00 per share; the next expected dividend, D1, is $4.25; and the dividend is expected to grow at a constant rate of 4% per year. The target capital structure consists of 75% common stock, 15% debt, and 10% preferred stock. What is the cost of each of the capital components? Do not round intermediate calculations. Round your answers to two decimal places. Cost of debt:   % Cost of preferred stock:   % Cost of retained earnings:   % What is Adamson's WACC? Do not round intermediate calculations. Round your answer to two…
Adamson Corporation is considering four average-risk projects with the following costs and rates of return: Project Cost Expected Rate of Return 1 $2,000 16.00% 2 3,000 15.00 3 5,000 13.75 4 2,000 12.50 The company estimates that it can issue debt at a rate of rd = 9%, and its tax rate is 35%. It can issue preferred stock that pays a constant dividend of $3 per year at $44 per share. Also, its common stock currently sells for $36 per share; the next expected dividend, D1, is $3.75; and the dividend is expected to grow at a constant rate of 7% per year. The target capital structure consists of 75% common stock, 15% debt, and 10% preferred stock. A. What is the cost of each of the capital components? Round your answers to two decimal places. Do not round your intermediate calculations. Cost of debt Cost of preferred stock Cost of retained earnings B. What is Adamson's WACC? Round your answer to two decimal places. Do not round your intermediate calculations.
Adamson Corporation is considering four average-risk projects with the following costs and rates of return: Project Cost Expected Rate of Return 1 $2,000 16.00% 2 3,000 15.00 3 5,000 13.75 4 2,000 12.50 The company estimates that it can issue debt at a rate of rd = 9%, and its tax rate is 35%. It can issue preferred stock that pays a constant dividend of $6 per year at $57 per share. Also, its common stock currently sells for $39 per share; the next expected dividend, D1, is $4.50; and the dividend is expected to grow at a constant rate of 5% per year. The target capital structure consists of 75% common stock, 15% debt, and 10% preferred stock. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. What is the cost of each of the capital components? Round your answers to two decimal places. Do not round your intermediate calculations. Cost of debt _________% Cost…
GoldPure is considering the following independent, average-risk investment projects: Project Size of Project Project IRR Project V P1.0 million 12.0% Project W 1.2 million 11.5 Project X 1.2 million 11.0 Project Y 1.2 million 10.5 Project Z 1.0 million 10.0 The company has a target capital structure that consists of 50 percent debt and 50 percent equity. Its after-tax cost of debt is 8 percent, its cost of equity is estimated to be 16.5 percent, and its net income is P2.5 million. If the company follows a residual dividend policy, what will be its plowback ratio? Answers: a. 32% b. 100% c. 12% d. 54% e. 68% f. 66% g. 0