+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
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 are considering the purchase of one of two machines used in your manufacturing plant. Machine A has a life of two years, costs $160 initially, and then $95 per year in mai
When using the shortest life planning horizon (non LCM approach), what issue should you explicitly consider for alternatives whose cash flow profiles extend longer than the sh
Warrior Industries is installing new equipment at a cost of $12,000,000. Expected cash flows from this project over the next 5 years will be $2,000,000, $2,000,000, $4,000,000
Given two comparable bonds A and B with par values of $1000. Both bonds mature in twenty years. Bond A has a coupon rate of 15%. Bond B has a coupon rate of 9%. Which bond has
What is the difference between NPV,IRR, Payback analysis and how are these methods related? What are examples of opportunity costs and incremental cash flows? How does the cas
Gamecocks Inc.'s free cash flow to the firm (FCFF) was $20 million in its most recent fiscal year that just ended. The company's FCFF is expected to grow steadily at 5% per ye
IBM has a bond issue outstanding with 14 years to maturity. When originally issued the bond had a par value of $1,000, a stated coupon rate of 12% and 15 years to maturity. Cu
Breakeven point and all forms of leverage TOR most recently sold 100,000 units at $7.50 each; its variable operating costs are $3.00 per unit, and its fixed operating costs ar