Use as the discount rate to find the npv

Assignment Help Financial Management

Reference no: EM132045478

You have been hired as a financial consultant to Defense Electronics, Inc (DEI). The company is looking to set up a manufacturing plant overseas to produce a new product line. This will be a five-year project. The plant will be built on land already owned by DEI. That land could be sold today for $5.3 million. If the company pursues the project, the value of the land is projected to be $5.7 million in five years. The plant will cost $32 million to build and the project will require an initial net working capital investment of $1.3 million. This $32 million will be depreciated straight-line to zero over the five years of the project, but will be able to be scrapped for $3 million. The plant is expected to generate pre-tax “sales minus costs” each year of $12 million. The tax rate is 35%.

Find WACC and use as the discount rate to find the NPV.

You have the following information regarding the firms’ sources of financing:

• There are 230,000 7.2% coupon bonds outstanding with 25 years to maturity and a YTM of 6.8%.

• There are 8.8 million shares outstanding, selling for $71 per share. The beta is 1.1

• The market risk premium is 7% and the risk-free rate is 5%.

Reference no: EM132045478

Questions Cloud

How much will mahmet employer withhold in medicare taxes : Mahmet earned wages of $115,650 during 2013. He is single and claims two withholding allowances. How much will Mahmet's employer withhold in Medicare taxes

Determine the fair present value of the bond : Determine the fair present value of the bond if market conditions justify a 14 percent required rate of return, compounded semiannually.

Summarize your network security controls in detail : Summarize your network security controls in a Word document and submit it to your instructor. You must provide rationale for your choices by explaining.

What are some positive and negative actions : What are some positive and negative actions about personal information being accessed by companies on the internet.

Use as the discount rate to find the npv : Find WACC and use as the discount rate to find the NPV.

Develop a decision tree using the appropriate support tool : Calculate the possible profit using the most appropriate support tool as described in Part c. Show calculations.

Landmines pure gold producer needs money : Landmines a pure gold producer needs money. what is the amount of money that they can raise?

Describe the three rudimentary services provide by sms : As part of GSM, describe the three rudimentary services provide by SMS. When does SMS spoofing occur? Please describe a typical scenario.

Concern for the management team : Provide a response to the following concern for the management team below.

User Account

All Pages