+1-415-670-9189
info@expertsmind.com
Maximum initial cost of company would be willing to pay
Course:- Financial Management
Reference No.:- EM13942985




Assignment Help
Expertsmind Rated 4.9 / 5 based on 47215 reviews.
Review Site
Assignment Help >> Financial Management

Och, Inc., is considering a project that will result in initial aftertax cash savings of $1.76 million at the end of the first year, and these savings will grow at a rate of 3 percent per year indefinitely. The firm has a target debt–equity ratio of .85, a cost of equity of 11.6 percent, and an aftertax cost of debt of 4.4 percent. The cost-saving proposal is somewhat riskier than the usual projects the firm undertakes; management uses the subjective approach and applies an adjustment factor of +1 per cent to the cost of capital for such risky projects.

What is the maximum initial cost of company would be willing to pay for the project? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.)




Put your comment
 
Minimize


Ask Question & Get Answers from Experts
Browse some more (Financial Management) Materials
You receive a credit card application from Shady Banks Savings and Loan offering an introductory rate of .5 percent per year, compounded monthly for the first six months, incr
Dulcimer, Inc. has a 5%, semi-annual coupon bond with a current market price of $988.52. The bond has a par value of $1,000 and a yield to maturity of 5.29%. How many years is
On January 5, 2015, Allan purchases 500 shares of Wichmann, Inc., common stock at a cost of $23,400. On April 1, 2015, he purchases an additional 300 shares for $19,890. On No
A parent decides to buy a two bedroom condo for 65,000 by putting 10% down and financing the rest for 15 years at an annual rate of 3.5%. What is the monthly payment? One bedr
The 2014 balance sheet of Sugarpova's Tennis Shop, Inc., showed long-term debt of $2.9 million, and the 2015 balance sheet showed long-term debt of $3.1 million. The 2015 inco
If the expansion was going to be financed partially with debt, would it still make sense to use the firm's existing cost of debt, or should you compute a new rate of return
Kenny, Inc., is looking at setting up a new manufacturing plant in South Park. The company bought some land six years ago for $7.7 million in anticipation of using it as a war
Stock A has a standard deviation equal to 20% and an expected return of 11%. Stock B has a standard deviation equal to 25% and an expected return of 14%. The correlation coeff