Pecking order hypothesis. Rachel can raise capital from the sources in the popup window: What is Rachel's weighted average cost of capital if she needs to raise a. $10,000? b. $25,000? c. $30,000? a. What is Rachel's weighted average cost of capital if she needs to raise $10,000? % (Round to two decimal places.)
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- Julie wants to borrow $10,250 from you. She has offered to pay you back $12,250 in a year. If the cost of capital of this investment opportunity is 12%, what is its NPV? Question content area bottom Part 1 The NPV of the investment is $enter your response here. (Round to the nearest cent.)You are considering investing in a start up company. The founder asked you for $290,000 today and you expect to get $980,000 in 8 years. Given the riskiness of the investment opportunity, your cost of capital is 25%. What is the NPV of the investment opportunity? Should you undertake the investment opportunity? Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged.Monica is the CFO of Cooking for Friends (CFF) and uses the pecking order hypothesis philosophy when she raises capital for company projects. Currently, she can borrow up to $ 400000 from her bank at a rate of 7.5%, float a bond for $700000 at a rate of 10%, or issue additional stock for $1300000 at a cost of 18%. What is the WACC for CFF if Monica chooses to invest a. $800000 in new projects? b. $2200000 in new projects? c. $2400000 in new projects?
- (a) What is the unlevered cost of capital? What is the (post-tax) weighted average cost of capital? [SHOW YOUR WORKING] (b) Should the firm do the project? (Yes/No). How much firm increases in value thanks to the new project? [SHOW YOUR WORKING] (c) What is the debt capacity for the new project in year 0? [SHOW YOUR WORKING]You have been offered a unique investment opportunity. If you invest $8,900 today, you will receive $445 one year from now, $1,335 two years from now, and $8,900 ten years from now. a. What is the NPV of the opportunity if the cost of capital is 6.7% per year? Should you take the opportunity? b. What is the NPV of the opportunity if the cost of capital is 2.7% per year? Should you take it now?Ross Enterprises can raise capital from the source below: Ross has a new project that has an estimated IRR of 12%, but will require an investment of $220,000. Should Ross borrow the money and invest in the new project? What is Ross's weighted average cost of capital (WACC) if it needs to raise $220,000? Source of Funds Interest Rate Borrowing Limit Small business bureau 5% $60,000 Bank loan 7% $50,000 Bond market 12% $60,000 Owner's equity (stock) 16% $90,000
- Jade is CEO of InvestCo, a financial advisory firm for the wealthy. Her firm’s WACC is 10.00%. Her firm is investigating two projects, and they have asked you to determine which one to pursue. Project D requires an initial investment of $112,000, while project E requires an up-front investment of $98,000. Given the cashflows for each project listed below, answer the following questions. (important: make sure to place negative sign (-) in front of any negative cash flow.) A.) what is the NPV of the project that has the highest NPV? B.) what is the IRR of the project that has the highest IRR? C.) What is the Profitability Index of the Project that has the highest Profitability Index? Year Project D Project E 1 39,400 37,900 2 54,600 51,800 3 46,200 32,400 For NPV: write dollar amounts out to the penny with no dollar sign. Make sure you show negative sign (-) to indicate negative NPV. For IRR: interest…Nu Things, Inc., is considering an investment in a business venture with the following anticipated cash flow results: Assume MARR is 20% per year. Based on an internal rate of return analysis (1) determine the investment’s worth; (2) state whether or not your results indicate the investment should be undertaken; and (3) state the decision rule you used to arrive at this conclusion.You are considering the following two mutually exclusive investment opportunities. If your cost of capital is 13%, which is better. Explain your reasoning and support numerically. Capital is not rationed. Opportunity A would cost $1000 and return $400 per year for 4 years. Opportunity B would cost $2200 and would return $1000 per year for 3 years.