Calculate the wacc and irr, Financial Management

Assignment Help:

The capital structure of Wild West Inc. is as follows:

Debts: $5,000,000 (face value) bonds with coupon rate at 8.00% and current price at par
Preferred shares: $2,000,000 (face value) paying 5% dividends which is trading at 95 percent
Common shares: Current stock price at $5 per share with 1,000,000 shares issued and outstanding. The risk-free rate is 5%, the market risk premium is 6%, and the beta of Wild West Inc. is 1.15
Marginal tax rate is 40%

Show your calculation

a. Calculate the WACC for Wild West Inc.

b. Should Wild West Inc. accept an IRR of 7% new project which is of similar risk as all the existing projects of the Big Plan? Why and why not?

c. Should Wild West Inc. accept an IRR of 12% new project which is considered 30% higher in risk as compared with all the existing projects of the Big Plan? Why and why not?

Related Discussions:- Calculate the wacc and irr

Financial reform, The recent financial reform in the Public Sector that had...

The recent financial reform in the Public Sector that had been implemented in Fiji is essential. Critically evaluate this statement.

Explain about book value weights, Q. Explain about Book Value Weights? ...

Q. Explain about Book Value Weights? Book Value Weights: - Book value weights are calculating form the values taken from the balance sheet. The weight to be assigned to every s

Time Value of money, Annuity

Annuity

Cost of capital , ABC Ltd. Produces electronic components with a selling pr...

ABC Ltd. Produces electronic components with a selling price per of Rs.100. Fixed cost amount to Rs.2,00,000/- 5000 units are produced and sold each year. Annua

Explain adjustments necessary to translate enterprise value, Explain the ad...

Explain the adjustments necessary to translate enterprise value to the total present value of common equity. To gain the value of the company's common stock add the value of th

Hy would a borrower be willing to pay and a lender demand, Would there be p...

Would there be positive interest rates on bonds in a world with absolutely no risk no default risk, maturity risk, and so on? Why would a, borrower be willing to pay and a lender d

Show inter-corporate deposits, Q. Show Inter-Corporate Deposits? Inter-...

Q. Show Inter-Corporate Deposits? Inter-Corporate Deposits: Inter-corporate lending/borrowing or deposits (ICDs) is a popular short-term investment alternative for companies in

I need urgent help in Financial Managment, How to get cost differential whe...

How to get cost differential when 100% done by a single party only.

Accounts receivable are sometimes not collected, Accounts receivable are so...

Accounts receivable are sometimes not collected.Why do companies extend trade credit when they could insist on cash for all sales? Extending trade credit almost for all the tim

State the term nature of financial instruments, State the term nature of fi...

State the term nature of financial instruments. Nature of financial instruments (securities): Financial instruments (termed as securities) can be classifies in two broad

Write Your Message!

Name

Email id

Message

Verfication Code

User Account

All Pages