Discounted payback for project

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AFTER-TAX COST OF DEBT - The Holmes Company's currently outstanding bonds have an 8% coupon and a 10% yield to maturity. Holmes believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 40%, what is Holmes' after-tax cost of debt? PROJECT SELECTION - Midwest Water Works estimates that its WACC is 10.5%. The company is considering the following capital budgeting projects:

Assume that each of these projects is just as risky as the firm's existing assets and that the firm may accept all the projects or only some of them. Which set of projects should be accepted? Explain. COST OF COMMON EQUITY WITH AND WITHOUT FLOTATION - The Evanec Company's next expected dividend, D1, is $3.18; its growth rate is 6%; and its common stock now sells for $36.00. New stock (external equity) can be sold to net $32.40 per share. What is Evanec's cost of retained earnings, rs? What is Evanec's percentage flotation cost, F? What is Evanec's cost of new common stock, re? CAPITAL BUDGETING CRITERIA - A firm with a 14% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows:

Calculate NPV, IRR, MIRR, payback, and discounted payback for each project. Assuming the projects are independent, which one(s) would you recommend? If the projects are mutually exclusive, which would you recommend?

Reference no: EM131340887

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