What is initial cost of project including flotation costs

Assignment Help Financial Management
Reference no: EM13911105

Rodney Ruxin's Legal Services is raising capital to open a new law office in southern California. The project has an initial start up cost of $752,995. The firm maintains a debt-equity ratio of 0.50 and has a flotation cost of debt of 6.8 percent and a flotation cost of equity of 11.4 percent. The firm has sufficient internally generated equity to cover the equity cost of this project. What is the initial cost of the project including the flotation costs (enter your response as positive number, i.e. initial investment of $1 million as 1000000)?

Reference no: EM13911105

Questions Cloud

Mobikash is not the only mobile money system in kenya : MobiKash is not the only mobile money system in Kenya. Safaricom M-Pesa is the oldest and largest of the other mobile money systems. However, the others are tied to specific banks or network operators. Using the competitive concepts you studied in..
Net value of the payments vs. receipts in todays dollars : Carol Thomas will pay out $18,000 at the end of the year 2, $20,000 at the end of year 3, and receive $22,000 at the end of year 4. With an interest rate of 11 percent, what is the net value of the payments vs. receipts in today's dollars?
What was your effective ear over the holding period : You buy a bond with a $1,000 par value today for a price of $910. The bond has 7 years to maturity and makes annual coupon payments of $82 per year. You hold the bond to maturity, but you do not reinvest any of your coupons. What was your effective E..
An investment has a required return : An investment has a required return of 13 percent. The cash flows, in order, are -$42,000 (initial cost), $16,500 (year 1 CF), $28,400 (year 2 CF) and $7,500 (year 3 CF). Based on IRR, should this project be accepted?
What is initial cost of project including flotation costs : Rodney Ruxin's Legal Services is raising capital to open a new law office in southern California. The project has an initial start up cost of $752,995. The firm maintains a debt-equity ratio of 0.50 and has a flotation cost of debt of 6.8 percent and..
What is the value of each of the four mobikash standards : What is the value of each of the four MobiKash standards listed near the beginning of this case study?
What will the principal balance on the loan be : You take out a 30-year $300,000 mortgage loan with an APR of 8 percent and monthly payments. What are the monthly payments? In 16 years you decide to sell your house and payoff the mortgage. What will the principal balance on the loan be? What will y..
The following data are for the two products produced : The following data are for the two products produced by Shakti Company.
Considering a project with the data : You are considering a project with the following data: IRR = 8.7 percent; PI = .98; NPV = -$393; Payback period = 2.44 years. Which one of the following statements is correct given this information?

Reviews

Write a Review

Financial Management Questions & Answers

  Consumer and investors confidences increases

Loanable funds theory practice: show a graph how events a b and will affect supply and demand for Loans and equilibrium interest rate. Consumer and investors confidences increases

  Calculate the base-case cash flow and NPV

You are evaluating a project that costs $840,000, has seven-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 90,000 units per year. Price per unit is $40, vari..

  What is the firms cost of equity

Eccles Inc., a zero growth firm, has an expected EBIT of $120,000 and a corporate tax rate of 35%. Eccles uses $500,000 of 12% debt, and the cost of equity to an unleveled firm in the same risk class is 16%. What is the firm's cost of equity?

  Annual fund operating expenses

Suppose an individual invests $23,000 in a load mutual fund for two years. The load fee entails an up-front commission charge of 2.7 percent of the amount invested and is deducted from the original funds invested. In addition, annual fund operating e..

  What was the firms operating cash flow

The 2011 balance sheet of Anna’s Tennis Shop, Inc., showed long-term debt of $6.0 million, and the 2012 balance sheet showed long-term debt of $6.25 million. The 2012 income statement showed an interest expense of $205,000. What was the firm’s 2012 o..

  Bonds pay an annual coupon rate

Pet food Company bonds pay an annual coupon rate of 8.10 %. Coupon payments are paid semi annually. Bonds have 5 years to maturity and par value of $1,000. Compute the value of Pet Food Company bonds if the market interest rate on this type of bond i..

  Explain the value and weaknesses of the gordon model

Explain the relationship observed between the required rate of return, growth rate and the dividend paid, and the estimated value of the stock using the Gordon Model. Explain the value and weaknesses of the Gordon model

  About the investment opportunity

Lakonishok Equipment has an investment opportunity in Europe. The project costs €12 million and is expected to produce cash flows of €1.8 million in Year 1, €2.6 million in Year 2, and €3.5 million in Year 3. The current spot exchange rate is $1.36/€..

  Suppose call on stock with strike price-piece-wise function

Suppose a call on a stock with strike price X +1 cost $1 and a put on a stock with strike price X −1 and the same expiration date costs $1. Suppose the price of the stock on expiration date is given by ST. Find the payoff to the investor that holds b..

  What is a ruined cost

What is a ruined cost. Why is it important to understand this concept when analyzing capital projects

  What is the price of treasury strips with face value

What is the price of a Treasury STRIPS with a face value of $100 that matures in 8 years and has a yield to maturity of 8.0 percent? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.

  Assume the net working capital will be recovered at the end

Kinky Copies may buy a high-volume copier. The machine costs $210,000 and will be depreciated straight-line over 5 years to a salvage value of $38,000. Kinky anticipates that the machine actually can be sold in 5 years for $49,000. The firm’s margina..

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