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A company projects with 20% debt, 10% preferred stock and 70% common stock.
The company has a 15 year, 5% coupon bonds selling at 102(par is 100).
Company’s preferred stock has 8% preferred dividend on a par value of 100 that is currently priced at 99.5. Preferred has a flotation cost of .07/
Company’s common stock currently sells for $27.50 a share and has a dividend that is currently $1.89 a share and is expected to grow at a constant rate of 3.5% per year.
Assume that the flotation cost for new stock is .03. The firm has 25,000,000 in retained earnings. The company’s tax rate is 30%.
Calculate and graph the firm’s MCC.
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Sun Lee’s is considering two mutually exclusive projects that have been assigned the same discount rate of 10.5 percent. Project A has an initial cost of $54,500, and should produce cash inflows of $16,400, $28,900, and $31,700 for Years 1 to 3, resp..
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