What is the after-tax cost of debt for burly

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Reference no: EM13767631

Burly Owl Inc. is going to purchase a new machine that will cost $200,000. The machine has a useful life of 4years and falls into the 3-year property class for the depreciation purposes. The IRS MACRS schedule for the four years is 1)33.33% 2)44.44% 3)14.82% 4)7.41%. It will generate $70,000 per year of savings for Burly and has not salvage value. Burly's corporate tax rate is 40%. In addition, Butly has 3000 outstanding 9% annual coupon bonds with a $1,000 par value, 15years to maturity and a price of $1085. Butly also has 100,000 shares of common stocks outstanding that is selling for $45 per share. This stock has a beta of 1.65, the expected market return is 12% and the risk-free rate is 5%. Finally, Burly has 26,000 shares of preferred stock outstanding that pays a $6.5 dividend and sells for $40 per share.

What is the operating cash flow for the machine for years 1-4?

What is the after-tax cost of debt for burly?

What is the cost of equity capital?

What is the cost of preferred capital?

What is Burly's WACC

The NPV of Burly's project is?

Reference no: EM13767631

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