PLEASE DO THE SOLUTIONS MANUALLY. NOT THRU EXCEL. OTHERWISE DOWNVOTE.PLEASE SKIP THIS IF YOU ALREADY DID THIS OTHERWISE, DOWNVOTE.I WILL UPVOTE IF YOU FOLLOW MY INSTRUCTIONS Problem 3. Mala Prohibita Inc. is evaluating a proposal to acquire a new equipment. The equipment wouldrequire an investment of P417,860, including freight and installation cost of P40,000. It expected to have a 10-year life with no scrap value at the end of its life. It has been estimated that the new equipment would increasethe company's cash inflows, net of expenses and income taxes by P68,000. The company can issue its 7%P1,000 par value bond to fund the project. The same type of bond is available in the market at P932.04836 perbond with interest payable semi-annually for ten years. The company is subject to 32% income tax.Determine the Cost of Capital (k)Solution:3

Information Provided: Price of the bond = 932.04836 Coupon rate = 7% semi-annually Bond maturity =…

Answered: Determine the Cost of Capital (k)

Business

Finance

Determine the Cost of Capital (k)

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter10: Project Cash Flows And Risk

Section: Chapter Questions

Problem 1PROB

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PLEASE DO THE SOLUTIONS MANUALLY. NOT THRU EXCEL. OTHERWISE DOWNVOTE.

PLEASE SKIP THIS IF YOU ALREADY DID THIS OTHERWISE, DOWNVOTE.

I WILL UPVOTE IF YOU FOLLOW MY INSTRUCTIONS

Problem 3. Mala Prohibita Inc. is evaluating a proposal to acquire a new equipment. The equipment would
require an investment of P417,860, including freight and installation cost of P40,000. It expected to have a 10-
year life with no scrap value at the end of its life. It has been estimated that the new equipment would increase
the company's cash inflows, net of expenses and income taxes by P68,000. The company can issue its 7%
P1,000 par value bond to fund the project. The same type of bond is available in the market at P932.04836 per
bond with interest payable semi-annually for ten years. The company is subject to 32% income tax.
Determine the Cost of Capital (k)
Solution:
3

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