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The marginal cost of capital for amounts
Course:- Finance Basics
Reference No.:- EM13718594

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Affirm Timer Zeta, Inc., a pharmacutical firm can raise up to \$700 million for investment from a mixture of debt, preferred stock and retained equity. Above \$700 million, the firm must issue new common stock. Assuming that debt costs and preferred stock costs remain unchanged, the marginal cost of capital for amounts up to \$700 million will be ____ the marginal cost of capital for amounts over \$700 million.

less than
equal to
greater than
cannot be determined from the information given

An investment project requires a net investment of \$100,000. The project is expected to generate annual net cash inflows of \$28,000 for the next 5 years. The firm's cost of capital is 12 percent. Determine the payback period for the project.

0.28 years
1.4 years
3.57 years
17.86 years

Project OBOL has an inital outlay (NINV and the only cash outlflow) of \$2000. If you are given the information that the NPV of the project is 234.96, what would be the Profitability Index for the project ?

1.11
1.51
1.89
0.89

The stock price of Webliography Inc., a web search engine company is currently \$31.51 and the current quarterly dividend is \$0.25. Consensus estimates for Webliography indicate a growth rate in earnings of 10% into the foreseeable future. If Webliography plans to sell 1 million shares to raise new capital for expansion, what is the cost of new equity if the issuance costs are 8%? (Hint: You need to calculate annual dividend from the quarterly dividend and use that as D0)

13.49%
10.87%
13.21%
13.17%

If a project has an inital outlay of \$560 and cash inflows of \$240 per year for three years, what would be its MIRR? Assume a cost of capital of 12%. Would you accept this project?

12%; No
11.79%; No
13.09%, yes
15.3%, no

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