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

Ask Question & Get Answers from Experts
Browse some more (Financial Management) Materials
The next dividend payment by Wyatt, Inc., will be $3.15 per share. The dividends are anticipated to maintain a growth rate of 6.50 percent, forever. Assume the stock currently
Suppose an increase in computer financial technology causes consumers to decrease the amount of money they hold in currency from 5% of the amount they hold in deposits to 1%.
The return from the market last year was 12% and the risk free rate was 6%. A hedge fund manager with a beta of 0.6 has an alpha of 5%. What return did the hedge fund manager
A zero coupon bond with a face value of $1,000 is issued with an initial price of $455.50. The bond matures in 18 years. What is the implicit interest, in dollars, for the fir
The four-quadrant model of DiPasquale and Wheaton (1992) has been used to describe the boom and bust cycle of real estate markets. Answer the following two questions: Draw the
In this Project You will discuss factors that may affect current and future performance of Apple company. Based on what you know about the organization’s financial health and
Suggest the financial ratio that most financial analysts would use to evaluate the financial condition of the company. Provide support for your rationale. Speculate on the org
Find the monthly payment needed to amortize a typical $150,000 mortgage loan amortized over 30 years at an annual interest rate of 4.9% compounded monthly. (Round your answers