Cost of capital for the project

Assignment Help Finance Basics
Reference no: EM132234954

Gateway Inc. has a corporate cost of capital of 11.5 percent. Its target capital structure is 55 percent equity and 45 percent debt. The before-tax cost of debt is 9 percent, and thecompany's tax rate is 30 percent. If the expected dividend next period (D1) and current stockprice are $5 and $45, respectively, I need the company's growth rate. Please show work.

Gateway just paid $10 million for a feasibility study. If the company goes ahead with theproject, it must immediately spend another $100 million now, and then spend $20 million in oneyear. In two years, it will receive $80 million, and in three years it will receive $90 million.  If the cost of capital for the project is 11 percent, I need the project's NPV and IRR. Please show work.

Gateway uses a cost of capital of 12 percentto evaluate average-risk projects, and it adds or subtracts 2 percentage points to evaluate projects of more or less risk. Currently, two mutually exclusive projects are under consideration. Bothhave a cost of $200,000 and will last four years. Project A, a riskier-than-average project, will produce annual end of year cash flows of $71,104. Project B, of less than average risk, will produce cash flows of $146,411 at the end of Years 3 and 4 only. I need to know which project should Gateway accept. Please show work.

Reference no: EM132234954

Variance analysis

Recommend at least two (2) strategies an administrator can apply to ensure that the budget is performing according to the established performance indicators. Justify your resp

Explain the excess burden of the subsidy

Calculate the present value of benefits minus costs when the social rate of discount is 10%. Dees the program merit approval? How would the present value of the net benefits

Does xyz take to pay for its purchases

The XYZ Company has annual average purchases of $200,000 and an ending accounts payable balance of $36,000. How long, on average, does XYZ take to pay for its purchases?

What must the coupon rate be on merton bonds

Merton Enterprises has bonds on the market making annual payments, with 14 years to maturity, and selling for $967. At this price, the bonds yield 7.9 percent. What must the

How can you "fit" a spot-rate tree to these bond prices

(a) How can you "fit" a spot-rate tree to these bond prices? Discuss.(b) Obtain a tree consistent with the term structure given above,(c) What are the differences, if any, bet

Find the force and location of the force acting on window

Glass viewing windows are to be installed in an aquarium. Each window is to be 0.6 m in diameter and to be centered 2 m below the surface level. Find the force and location

What was barbell net cash flow

Barbell Corporation's income statment reports that the company's "bottom line" was $180,000 in 2008. The Statement also shows that the company had depreciation and amortizat

What is the free cash flow

If a company has a capital structure of 20% debt 80% equity. The D/E ratio of .25. The risk free rate of 6%. The market risk premium is 5%. Tax rate is 40%. Assume 0 growth

Reviews

Write a Review

 
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd