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Hankins, Inc., is considering a project that will result in initial aftertax cash savings of $5.5 million at the end of the first year, and these savings will grow at a rate of 3 percent per year indefinitely. The firm has a target debt–equity ratio of .54, a cost of equity of 13.4 percent, and an aftertax cost of debt of 6.8 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 +3 percent to the cost of capital for such risky projects.
Calculate the WACC. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) WACC %
What is the maximum cost the company would be willing to pay for this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Present value $
As a financial advisor, you are assigned a new client who is considering investing in one of two stocks, A or B. The table below shows information about the performance of stocks A and B last year. What reasons will you convey to your client to justi..
Consider the role of financial intermediaries (banks, credit unions, insurance companies, broker/dealers, etc.) and their impact in/on your economic life.
For 2012, the balance sheet of Larsen Lithographics reported current assets of $9,190, net fixed assets of $11,400, current liabilities of $3,300, long-term debt of $2,780, common stock of $10,000 and retained earnings of $4,510. How much additional ..
Theo is a consultant who earns 72,000$ annually. His wife, Julia is a homemaker and theey have one child, Ben. Theo is covered by 200,000$ life insurance policy. The couple assumes an annual inflation rate of 3%. How would you design a finance plan f..
W Mart has sales of $601,506, COGS and SG&A totaling $212,765, depreciation expense of $122,525, and taxes paid of $80,400. What is the amount of W Mart's cash flow from assets?
How much less is this than the amount Globalcorp would have received if the remittance had been made immediately instead of three months later?
You read in the wall street journal that apple is introducing a new i phone. Once you read about the news you quickly purchase the stock and make a large profit from this information. If this happens, what form of the efficient market hypothesis has ..
Compare and contrast the internal rate of return approach to the net present value approach to capital rationing. Which is better? Support your answer with well-reasoned arguments and examples.
Daniel's Market has sales of $36,600, costs of $28,400, depreciation expense of $3,100, and interest expense of $1,500. If the tax rate is 34 percent, what is the operating cash flow, OCF?
Fran, Joe, and Mike formed a general partnership to operate a flower shop called Fresher Flowers. One of Fran’s jobs is to make deliveries using the partnership truck. In one such delivery, Fran negligently ran a stop sign, striking a car driven by P..
The Beranek Company, whose stock price is now $20, needs to raise $20 million in common stock. Underwriters have informed the firm's management that they must price the new issue to the public at $16 per share because of signaling effects. How many s..
Ben corporation has sales of 5000000, net income of 800000, total assets of 2000000, and 100000 shares of common stock outstanding. if ben's P/E ratio is 12, what is the company's current stock price?
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