What is the maximum initial cost the company

Reference no: EM13273294

Scanlin, Inc., is considering a project that will result in initial aftertax cash savings of $1.89 million at the end of the first year, and these savings will grow at a rate of 2 percent per year indefinitely. The firm has a target debt-equity ratio of 0.80, a cost of equity of 12.9 percent, and an aftertax cost of debt of 5.7 percent. The cost-saving proposal is somewhat riskier than the usual project the firm undertakes; management uses the subjective approach and applies an adjustment factor of 1 percent to the cost of capital for such risky projects.

What is the maximum initial cost the company would be willing to pay for the project?

Reference no: EM13273294

Questions Cloud

What is the voltage amplitude across the resistor : An L?R?C series circuit has phase angle -33.0?. What is the voltage amplitude across the resistor

Calculate the cost of equity using the sml method : Berta Industries stock has a beta of 1.25. The company just paid a dividend of $0.40, and the dividends are expected to grow at 5 percent. The expected return on the market is 12 percent, and Treasury bills are yielding 4.7 percent. The most recen..

Production of printed circuit boards for the electronics : In the production of printed circuit boards for the electronics industry, a 0.715 mm layer of copper is laminated onto an insulating plastic board. Next a circuit pattern made of a chemically resistant polymer is printed on the board.

Flow direction of a littoral current depends-transfer dunes : The flow direction of a littoral current depends on what two factors? Which of the following is not an ersion landform produced by wind action? The two processes of beach and littoral drift can build a finger-like extension along a shorelike, called ..

What is the maximum initial cost the company : What is the maximum initial cost the company would be willing to pay for the project?

Find the amplitude of the resulting swings of this pendulum : A rocket is accelerating upward at 4.90m/s2 from the launchpad on the earth. If the ball is displaced 8.50 ? from the vertical and released, find the amplitude of the resulting swings of this pendulum

Explain the final dilution obtained after dilution series : What is the final dilution obtained after each dilution series shown below

What is the frequency of oscillation of the mouse : An unhappy rodent of mass 0.310kg , moving on the end of a spring with force constant 2.50N/m, If the constant b has the value 0.901kg/s, what is the frequency of oscillation of the mouse

Special covenant between the jewish people and god : Discuss the significance of the "special covenant" between the Jewish people and God. Name at least two examples of this covenant in the Jewish religion.

User Account

All Pages