Reference no: EM131357392
Photochronograph Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt−equity ratio of .80. It’s considering building a new $50 million manufacturing facility. This new plant is expected to generate aftertax cash flows of $6.2 million in perpetuity. The company raises all equity from outside financing. There are three financing options:
1. A new issue of common stock: The flotation costs of the new common stock would be 8 percent of the amount raised. The required return on the company’s new equity is 14 percent.
2. A new issue of 20-year bonds: The flotation costs of the new bonds would be 4 percent of the proceeds. If the company issues these new bonds at an annual coupon rate of 8 percent, they will sell at par.
3. Increased use of accounts payable financing: Because this financing is part of the company’s ongoing daily business, it has no flotation costs, and the company assigns it a cost that is the same as the overall firm WACC. Management has a target ratio of accounts payable to long-term debt of .15. (Assume there is no difference between the pretax and aftertax accounts payable cost.)
What is the NPV of the new plant? Assume that PC has a 35 percent tax rate. (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567. Do not round intermediate calculations and round your final answer to the nearest whole dollar amount.)
|
Trade credit to the wholesaler non discount customers
: A wholesaler sells on terms of 1/15, net 45. Gross sales last year were $6,935,000, and accounts receivable averaged $665,000. Half of its customers paid on the 15th day and took discounts. What are the nominal and effective costs of trade credit to ..
|
|
What will be flotation-adjusted cost of equity
: Suppose that Brown-Murphies’ common shares sell for $22.00 per share, that the firm is expected to set their next annual dividend at $0.67 per share, and that all future dividends are expected to grow by 4 percent per year, indefinitely. Assume Brown..
|
|
Portfolio of two assets-standard deviations of the assets
: You are constructing a portfolio of two assets, Asset A and Asset B. The expected returns of the assets are 10 percent and 16 percent, respectively. The standard deviations of the assets are 37 percent and 45 percent, respectively. What is the smalle..
|
|
What is the total liabilities to total assets ratio
: I have 600 USD in Current Assets and 2000 USD in Total assets. Current liabilities are 550 millions and total liabilities are 860 millions. What is equity multiplier? What is the total liabilities to total assets ratio?
|
|
Photographic equipment-what is the npv of the new plant
: Photochronograph Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt−equity ratio of .80. It’s considering building a new $50 million manufacturing facility. A new issue of common stock: The flotation ..
|
|
What is the investor expected return
: An investor put 40% of her money in Stock A and 60% in Stock B. Stock A has a beta of 1.2 and Stock B has a beta of 1.6. If the risk-free rate is 5% and the expected return on the market is 12%, what’s the investor’s expected return? (CAPM: Ri = Rf +..
|
|
The most control over property-level operations
: Which of the following provides investors with the most control over property-level operations?
|
|
Handeling beggining work in process invetory
: Compute the Equivalent units of production. (obj.1) the monthly production report made by the manager of the planning and sanding department of harmony piano compnay for september contain the following information: labor and overhead 65% complete. co..
|
|
What is the smallest expected gain over the next year
: A stock has an annual return of 10.2 percent and a standard deviation of 40 percent. What is the smallest expected gain over the next year with a probability of 1 percent?
|