WACC for the last dollar raised to complete the expansion

Assignment Help Financial Management
Reference no: EM13947711

Klose Outfitters Inc. believes that its optimal capital structure consists of 30% common equity and 70% debt, and its tax rate is 40%. Klose must raise additional capital to fund its upcoming expansion. The firm will have $1 million of retained earnings with a cost of rs = 14%. New common stock in an amount up to $8 million would have a cost of re = 17%. Furthermore, Klose can raise up to $4 million of debt at an interest rate of rd = 9%, and an additional $3 million of debt at rd = 12%. The CFO estimates that a proposed expansion would require an investment of $4.6 million. What is the WACC for the last dollar raised to complete the expansion? Round your answer to two decimal places.

Reference no: EM13947711

Questions Cloud

Interpretation-evaluation-conclusion and prediction : Describe beliefs you have that fall in each of these categories (interpretation, evaluation, conclusion, prediction)and then explain the reason(s) you have for endorsing the beliefs.
Determine modified coefficient of performance : Using the results of Problem 1.38, determine the modified coefficient of performance and the required power input W under (a) clean and (b) dusty coil conditions.
Compute the approximate internal rate of return : Compute the approximate internal rate of return (IRR) of the following investment project:
Dentify one misconception associated : Identify one misconception associated with the impact of the Civil Rights Act of 1964.
WACC for the last dollar raised to complete the expansion : Klose Outfitters Inc. believes that its optimal capital structure consists of 30% common equity and 70% debt, and its tax rate is 40%. Klose must raise additional capital to fund its upcoming expansion. The firm will have $1 million of retained earni..
Assignment, interview a hospital administrator : Refer to the "Collaborative Learning Community: Analysis of an Ethical Dilemma" resource for the dilemmas and resources that will be used for this multi-part Analysis of an Ethical Dilemma assignment. Part Two is an individual assignment that will..
Bond-yield-plus-judgmental-risk-premium approach : The earnings, dividends, and common stock price of Shelby Inc. are expected to grow at 5% per year in the future. Shelby's common stock sells for $22.00 per share, its last dividend was $2.40, and the company will pay a dividend of $2.52 at the end o..
Natural convection between the person and room : The exposed surface of a person in the room may be assumed to be at a tempera- ture of 32°C throughout the year and to have an emis- sivity of 0.90. The coefficient associated with heat transfer by natural convection between the person and the roo..
What is the calculated value of chi-square : The proportion of middle managers leaving large IT companies within three years is to be estimated within 3 percent. The 0.95 degree of confidence is to be used. A study conducted several years ago revealed that the percent of managers leaving wit..

Reviews

Write a Review

 

Financial Management Questions & Answers

  What is the present value of the following future amount

What is the present value of the following future amount? $340,589 to be received 15 years from now, discounted back to the present at 3 percent, compounded annually. Round to 2 decimals

  Two tax topics in mergers and acquisitions

Choose two tax topics in mergers and acquisitions that can put a stop to a deal in a moment’s notice, describe each, and provide how you would prevent them.

  Retirement fund withdraw

Gerard has estimated that he is going to need enough in his retirement fund to withdraw $80,000 per year beginning on his 66th birthday and for 19 additional years thereafter. How much will Gerard need in his retirement account at age 65 if his fund ..

  How would you include the dividends you earned

If you are buying and selling stock, how would you include the dividends you earned? For eample if I want to sell my stock after two weeks and my dividend is $1.50 & I just sold my stock and made $50.00. Would I add $1.50 to my earnings or do I have ..

  Depreciation is one of our biggest operating cash inflows

A business executive once stated, “Depreciation is one of our biggest operating cash inflows.” Do you agree? Explain.

  Non-dividend-paying stock has a futures contract with price

A non-dividend-paying stock has a futures contract with a price of $71.5 and a maturity of six months. If the risk-free rate is 4.1 percent, what is the price of the stock?

  How much should we offer to percy

In preparation for the meeting you intend to make notes of the points you will raise with the directors. You are aware that the directors are people who have skills in horticulture and retailing, but not in more general business issues, particula..

  What is a fixed budget

What is a fixed budget? When is it an appropriate means of evaluating a manager’s performance and why?

  Change in net working capital must be considered as part

When evaluating a capital budgeting project, the change in net working capital must be considered as part of: a. the initial investment b. the incremental operating cash inflows c.th operating cash inflows d. the operating case outflows

  What is the purpose of working capital

What is the purpose of working capital? What is the working capital cycle and why must it be managed?

  Pretax operating costs-system requires initial investment

Kolby’s Korndogs is looking at a new sausage system with an installed cost of $882,000. This cost will be depreciated straight-line to zero over the project’s seven-year life, at the end of which the sausage system can be scrapped for $97,000. The sa..

  Write a 350- to 700-word rebuttal to the article using

locate an article about a controversial subject where the author makesnbspan argument you do not agree with.nbspwrite a

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd